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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___________)*
ATRIA SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, $0.01 PAR VALUE PER SHARE
- --------------------------------------------------------------------------------
(Title of Class of Securities)
04962G 10 2
-----------------------------------------------------------
(CUSIP Number)
CHUCK BAY, PURE SOFTWARE INC., 1309 SOUTH MARY AVENUE, SUNNYVALE, CA 94087
- --------------------------------------------------------------------------------
(408) 720-1600
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
JUNE 6, 1996
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [X]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP No. 04962G 10 2 Page 2 of 13 Pages
- --------------------------- ----------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PURE SOFTWARE INC.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
STATE OF DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
2,149,038 (acquisition of such shares is
conditioned upon the occurrence of certain
events specified in that certain Stock Option
Agreement dated June 6, 1996 and filed as
Exhibit 4 to this Schedule 13D
NUMBER OF 8 SHARED VOTING POWER
SHARES 783,839
BENEFICIALLY
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 2,149,038 (acquisition of such shares is
REPORTING conditioned upon the occurrence of certain
PERSON events specified in that certain Stock Option
WITH Agreement dated June 6, 1996 and filed as
Exhibit 4 to this Schedule 13D)
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,932,877
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP No. 04962G 10 2 Page 3 of 13 Pages
- --------------------------- ----------------------------
Neither the filing of this Schedule 13D nor any of its contents shall be
deemed to constitute an admission by Pure Software Inc. that it is the
beneficial owner of any of the Common Stock referred to herein for purposes of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Act"), or
---
for any other purpose, and such beneficial ownership is expressly disclaimed .
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the common stock, par value $0.01
per share ("Issuer Common Stock"), of Atria Software, Inc., a Massachusetts
-------------------
corporation ("Issuer"). The principal executive offices of Issuer are located
------
at 20 Maguire Road, Lexington, Massachusetts 02173.
ITEM 2. IDENTITY AND BACKGROUND.
The name of the person filing this statement is Pure Software Inc., a
Delaware corporation ("Pure"). The address of the principal office and principal
----
business of Pure is 1309 South Mary Avenue, Sunnyvale, California 94087. Pure
develops, markets and supports a comprehensive, integrated suite of software
products that are designed to enable the production of reliable, high-quality
software and improve the software development process. Set forth in Schedule A
is a list of each of Pure's directors and executive officers, as of the date
hereof, along with the present principal occupation or employment of such
directors and executive officers, their respective citizenship and the name,
principal business and address of any corporation or other organization other
than Pure in which such employment is conducted. During the past five years
neither Pure nor, to Pure's knowledge, any person named in Schedule A to this
statement, has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors). Also during the past five years neither
Pure nor, to Pure's knowledge, any person named in Schedule A to this statement,
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activity subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to an Agreement and Plan of Reorganization dated June 6, 1996 (the
"Merger Agreement") among Pure, CST Acquisition Corporation, a Massachusetts
----------------
corporation and a wholly-owned subsidiary of Pure ("Merger Sub") and Issuer, and
----------
subject to the conditions set forth therein (including approval by stockholders
of Issuer and Pure), Merger Sub will be merged with and into Issuer (the
"Merger"), with each share of Issuer Common Stock being converted into the right
------
to receive 1.544615 shares of Pure common stock, $0.0001 par value per share
("Pure Common Stock"). The foregoing summary of the Merger is qualified in its
- -------------------
entirety by reference to the copy of the Merger Agreement included as Exhibit 1
to this Schedule 13D and incorporated herein in its entirety by reference.
<PAGE>
SCHEDULE 13D
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CUSIP No. 04962G 10 2 Page 4 of 13 Pages
- --------------------------- ----------------------------
This statement on Schedule 13D also relates to an option granted by Issuer
to Pure to purchase shares of Common Stock from Issuer and certain other matters
as described in Item 4 below.
ITEM 4. PURPOSE OF TRANSACTION.
As described in Item 3 above, this statement relates to the Merger of
Merger Sub, a wholly-owned subsidiary of Pure, with and into Issuer in a
statutory merger pursuant to the Massachusetts Business Corporation Law
("Massachusetts Law"). At the effective time of the Merger (the "Effective
- ------------------- ---------
Time"), the separate existence of Merger Sub will cease and Issuer will continue
- ----
as the surviving corporation and as a wholly-owned subsidiary of Pure
("Surviving Corporation"). The initial directors of the Surviving Corporation
- -----------------------
shall be the directors of Merger Sub immediately prior to the Effective Time,
and the initial officers of the Surviving Corporation shall be the officers of
Merger Sub immediately prior to the Effective Time. The Articles of
Organization of Merger Sub as in effect immediately prior to the Merger shall be
the Articles of Organization of the Surviving Corporation until thereafter
amended as provided by the Massachusetts Law and such Articles of Organization;
provided, however, at the Effective Time the Articles of Organization of the
- -------- -------
Surviving Corporation shall be amended so that the name of the Surviving
Corporation shall be "Atria Software, Inc." The Bylaws of Merger Sub as in
effect immediately prior to the Merger shall be the Bylaws of the Surviving
Corporation until thereafter amended.
In connection with the Merger, holders of outstanding Issuer Common Stock
will receive, in exchange for each share of Issuer Common Stock held by them,
1.544615 shares of Pure Common Stock. In addition, Pure will assume all options
outstanding under the Issuer's 1990 Stock Option Plan, 1994 Stock Plan and 1994
Non-Employee Director Stock Option Plan, and will assume all purchase rights
outstanding under the Issuer's Employee Stock Purchase Plan. If the Merger is
consummated, the Issuer Common Stock will be deregistered under the Act and
delisted from The Nasdaq National Market.
The Merger Agreement contains customary representations and warranties on
the part of Pure and Issuer, and the consummation of the Merger is subject to
customary closing conditions, including, without limitation, approval by the
stockholders of Pure and Issuer, no event with a material adverse effect with
respect to a party or a material shortfall in earnings of a party for the fiscal
quarter ending June 30, 1996. The Merger Agreement also contains covenants
regarding the activities of the parties pending consummation of the Merger.
Generally, each of the parties must conduct its business in the ordinary course
consistent with past practice.
Upon the occurrence of (i) the acceptance of a Superior Proposal (as such
term is defined below) by Issuer or the recommendation of a Superior Proposal by
the Board of Directors of Issuer to its stockholders, or (ii) the failure to
obtain the required vote by the stockholders of Issuer at a meeting of such
stockholders (an "Issuer Negative Vote") if prior to such Issuer Negative Vote
--------------------
there shall have occurred an Acquisition Proposal (as such term is defined
below) with respect to Issuer that has been publicly disclosed and not
withdrawn, then the Merger Agreement provides for the payment by Issuer to Pure
of a break-up fee of $25,000,000. If, however, prior to an Issuer Negative Vote
the Board of Directors of Issuer withholds,
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP No. 04962G 10 2 Page 5 of 13 Pages
- --------------------------- ----------------------------
withdraws or modifies in a manner adverse Pure its recommendation in favor of
the Merger but the events specified in clauses (i) or (ii) in the previous
sentence shall not have occurred, then the Merger Agreement provides for the
payment by Issuer to Pure of a break-up fee of $15,000,000. A break-up fee of
$5,000,000 must be paid by Issuer to Pure in the event of an Issuer Negative
Vote if Issuer is not required to make payment to Pure of the break-up fees
specified in the first two sentences of this paragraph.
Upon the occurrence of (i) the acceptance of a Superior Proposal by Pure or
the recommendation of a Superior Proposal by the Board of Directors of Pure to
its stockholders, or (ii) the failure to obtain the required vote by the
stockholders of Pure at a meeting of such stockholders (a "Pure Negative Vote")
------------------
if prior to such Pure Negative Vote there shall have occurred an Acquisition
Proposal with respect to Pure that has been publicly disclosed and not
withdrawn, then the Merger Agreement provides for the payment by Pure to Issuer
of a break-up fee of $25,000,000. If, however, prior to a Pure Negative Vote
the Board of Directors of Pure withholds, withdraws or modifies in a manner
adverse Issuer its recommendation in favor of the Merger but the events
specified in clauses (i) or (ii) in the previous sentence shall not have
occurred, then the Merger Agreement provides for the payment by Pure to Issuer
of a break-up fee of $15,000,000. A break-up fee of $5,000,000 must be paid by
Pure to Issuer in the event of a Pure Negative Vote if Pure is not required to
make payment to Issuer of the break-up fees specified in the first two sentences
of this paragraph.
The foregoing summary of the Merger is qualified in its entirety by
reference to the copy of the Merger Agreement included as Exhibit 1 to this
Schedule 13D and incorporated herein in its entirety by reference.
As an inducement to Pure to enter into the Merger Agreement, certain
stockholders of Issuer (collectively, "Voting Agreement Stockholders") have each
-----------------------------
entered into a Participation Agreement dated as of June 6, 1996 (the "Voting
------
Agreement") with Pure. Pursuant to the Voting Agreement, the Voting Agreement
- ---------
Stockholders have agreed to vote the shares of Issuer Common Stock owned by them
(i) in favor of approval and adoption of the Merger Agreement and the Merger and
any matter that could reasonably be expected to facilitate the Merger and (ii)
against approval of any proposal made in opposition to or competition with
consummation of the Merger. The Voting Agreement Stockholders have also agreed
if requested by Pure to execute and deliver to Pure an irrevocable proxy
granting Pure the authority to vote the shares of Issuer Common Stock owned by
the Voting Agreement Stockholders in the manner described in the previous
sentence. The Voting Agreement terminates upon the earlier to occur of the
Effective Time or the termination of the Merger Agreement. Each Voting
Agreement Stockholder and the number of outstanding shares of Issuer Common
Stock held of record by each Voting Agreement Stockholder as of June 1, 1996 is
set forth in Schedule B hereto which is hereby incorporated by this reference.
Pure did not pay any additional consideration to any Voting Agreement
Stockholder in connection with the execution and delivery of the Voting
Agreement. The foregoing summary of the Voting Agreement is qualified in its
entirety by reference to a copy of the Voting Agreement included as Exhibit 2 to
this Schedule 13D and incorporated herein in its entirety by reference.
<PAGE>
SCHEDULE 13D
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CUSIP No. 04962G 10 2 Page 6 of 13 Pages
- --------------------------- ----------------------------
As an inducement to Issuer to enter into the Merger Agreement, certain
stockholders of Pure have each entered into a Participation Agreement dated as
of June 6, 1996 with Issuer, the substance of which is substantially similar to
the substance of the Voting Agreement. A copy of this agreement is included as
Exhibit 3 to this Schedule 13D and incorporated herein in its entirety by
reference.
Also as an inducement to Pure to enter into the Merger Agreement, Pure and
Issuer entered into a Stock Option Agreement dated June 6, 1996 ("Stock Option
------------
Agreement") pursuant to which Issuer granted Pure the right (the "Option"),
- --------- ------
under certain conditions, to purchase up to 2,149,038 shares of Issuer Common
Stock by exchanging shares of Pure Common Stock at a rate of 1.544615 shares of
Pure Common Stock for each option share and/or, at Pure's election, at a price
of $62.75 per share (the "Exercise Price"). In the event that Pure elects to pay
--------------
any portion of the Exercise Price in cash, Pure will determine the source of the
necessary funds.
Subject to certain conditions, the Option may be exercised in whole or in
part by Pure (i) upon the commencement of a tender or exchange offer for 25% or
more of any class of Issuer's capital stock, (ii) in the event Issuer shall have
accepted a Superior Proposal (as such term is defined below) or if the Board of
Directors of Issuer recommends a Superior Proposal to the stockholders of Issuer
or (iii) in the event of an Issuer Negative Vote if prior to such Issuer
Negative Vote there shall have occurred an Acquisition Proposal (as such term is
defined below) with respect to Issuer which shall have been publicly disclosed
and not withdrawn (any of the events specified in clauses (i), (ii) or (iii) of
this sentence are referred to herein as an "Exercise Event"). The Stock Option
--------------
Agreement terminates upon the earlier of (i) at the Effective Time, (ii) 180
days following the termination of the Merger Agreement if an Exercise Event
shall have occurred on or prior to the date of such termination, and (iii) the
date on which the Merger Agreement is terminated if an Exercise Event shall not
have occurred on or prior to such date; provided, however, with respect to
-------- -------
clause (ii) of this sentence, that if the Option cannot be exercised by reason
of any applicable government order shall not have expired or been terminated,
then the Stock Option Agreement shall not terminate until the tenth business day
after such impediment to exercise shall have been removed or shall have become
final and not subject to appeal. Notwithstanding the foregoing, the Option may
not be exercised if Pure is in breach in any material respect of any of its
covenants or agreements contained in the Merger Agreement.
The term "Acquisition Proposal" means any proposal or offer relating to (i)
--------------------
any merger, consolidation, sale of substantial assets or similar transactions
involving an entity or any subsidiary of that entity (other than sales of assets
or inventory in the ordinary course of business or permitted under the terms of
the Merger Agreement), (ii) the sale of 10% or more of the outstanding shares of
capital stock of the entity (including without limitation by way of a tender
offer or an exchange offer), (iii) the acquisition by any person of beneficial
ownership or a right to acquire beneficial ownership of, or the formation of any
"group" (as defined under Section 13(d) of the Act and the rules and regulations
thereunder) which beneficially owns, or has the right to acquire beneficial
ownership of, 10% or more of the then outstanding shares of capital stock of the
entity (except for acquisitions for passive investment purposes only in
circumstances where the person or group qualifies for and files a Schedule 13G
with respect thereto) or (iv) any public announcement of a
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP No. 04962G 10 2 Page 7 of 13 Pages
- --------------------------- ----------------------------
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
The term "Superior Proposal" means an unsolicited bona fide Acquisition
-----------------
Proposal which the Board of Directors of an entity in its good faith reasonable
judgment determines, after consultation with its independent financial advisors,
would result in a transaction more favorable to the stockholders of the entity
from a financial point of view than the Merger and for which financing, to the
extent required, is then committed or which, in the good faith reasonable
judgment of the Board of Directors of the entity (based upon the advice of
independent financial advisors), is reasonably capable of being financed by such
person, entity or group, and which is likely to be consummated.
In addition, at any time during which the Option is exercisable Pure shall
have the right to sell to Issuer and Issuer shall be obligated to purchase from
Pure (i) the Option to the extent not previously exercised by Pure (the "Stock
-----
Option Agreement Put") and (ii) the shares of Issuer Common Stock, if any,
- --------------------
acquired by Pure pursuant to the Stock Option Agreement (the "Option Share
------------
Put"). The price that Issuer shall be required to pay in connection with the
Stock Option Agreement Put shall be equal to the difference between the Market
Price (as such term is defined below) for shares of Issuer Common Stock as of
the date Pure gives notice of its intent to exercise the Stock Option Agreement
Put and the Exercise Price, multiplied by the number of shares of Issuer Common
Stock purchasable pursuant to the Stock Option Agreement, but only if the Market
Price is greater than the Exercise Price. The price that Issuer shall be
required to pay in connection with the Option Share Put shall be the Exercise
Price paid by Pure for shares of Issuer Common Stock acquired pursuant to the
Stock Option Agreement plus the difference between the Market Price and such
Exercise Price (but only if the Market Price is greater than the Exercise Price)
multiplied by the number of shares of Issuer Common Stock so purchased.
Notwithstanding the foregoing, in connection with the Stock Option Agreement Put
and the Option Share Put, Issuer shall not be required to pay Pure an aggregate
amount in excess of the sum of (i) $40,000,000 plus (ii) the aggregate Exercise
Price paid by Pure for such shares minus (iii) any break-up fee paid by Issuer
to Pure in accordance with the Merger Agreement. The term "Market Price" means
------------
the highest closing sale price of shares of Issuer Common Stock on the Nasdaq
National Market during the five (5) trading days ending on the trading day
immediately preceding the date Pure gives notice of its intent to exercise the
Stock Option Agreement Put or the Option Share Put. Issuer has also granted
Pure certain registration rights that become effective in the event the Stock
Option Agreement is exercised. The foregoing summary of the Stock Option
Agreement is qualified in its entirety by reference to the copy of the Stock
Option Agreement included as Exhibit 4 to this Schedule 13D and incorporated
herein in its entirety by reference.
As an inducement to Issuer to enter into the Merger Agreement, Issuer and
Pure entered into a Stock Option Agreement dated June 6, 1996 pursuant to which
Pure granted Issuer the right under certain conditions to purchase up to
2,646,096 shares of Pure Common Stock by exchanging shares of Issuer Common
Stock at a rate of 0.64741 of a share of Issuer Common Stock for each option
share and/or, at Issuer's election, at a price of $40.625 per share. The
substance of this agreement is substantially similar to the substance of
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP No. 04962G 10 2 Page 8 of 13 Pages
- --------------------------- ----------------------------
the Stock Option Agreement, and a copy of this agreement is included as Exhibit
5 to this Schedule 13D and incorporated herein in its entirety by reference.
Also in connection with the Merger Agreement, certain stockholders of Pure
(each an "Affiliate") have each entered into an affiliate agreement with Pure
---------
(collectively, the "Affiliate Agreements") pursuant to which each Affiliate has
--------------------
agreed not to sell, exchange, transfer, pledge, dispose or otherwise reduce such
Affiliate's interest in or risk relative to any shares of Pure Common Stock or
other equity securities of Pure owned by such Affiliate during the period
commencing June 6, 1996 and ending at such time as financial results covering at
least 30 days of combined operations of Pure and Issuer have been published by
Pure, such publication to be in the form of a quarterly earnings report, an
effective registration statement filed with the Securities and Exchange
Commission (the "Commission"), a report to the Commission on Form 10-K, 10-Q or
----------
8-K or any other public filing or announcement which includes the combined
results of operations of Pure and Issuer, so as to interfere with Pure
accounting for the Merger as a pooling of interests. The foregoing summary of
the Affiliate Agreements is qualified in its entirety by reference to the copy
of a form of the Affiliate Agreement included as Exhibit 6 to this Schedule 13D
and incorporated herein in its entirety by reference.
Also in connection with the Merger Agreement, the Voting Agreement
Stockholders have each entered into an affiliate agreement with Pure. The
substance of these agreements is substantially similar to the substance
Affiliate Agreements, except that each Voting Agreement Stockholder has also
agreed that any sale, transfer or other disposition of Issuer Common Stock by
such Voting Agreement Stockholder will be made in accordance with Rule 145
promulgated by the Commission under the Securities Act of 1933, as amended, and
has made certain representations pertaining to continuity of interest with
respect to the shares held by such Voting Agreement Stockholder. A copy of a
form of this agreement is included as Exhibit 7 to this Schedule 13D and
incorporated herein in its entirety by reference.
Pure and Issuer have also entered into a License and Marketing Agreement
(the "License and Marketing Agreement") in connection with the Merger Agreement.
-------------------------------
The License and Marketing Agreement would become effective only in the event
that the Merger Agreement is terminated under certain circumstances, including
in the event of a regulatory prohibition, the failure of Pure's stockholders to
approve the Merger, a breach of the Merger Agreement by Pure or the acceptance
by Pure of an alternative transaction. The License and Marketing Agreement, if
effective, would permit Issuer to market, distribute, support and maintain
Pure's DDTS defect tracking system product, and modify and create derivative
works of the product. Issuer would pay Pure a royalty of 30% of the net revenue
Issuer recognizes from the licensing of the product, or from support services
provided by Issuer for the product, and a royalty of 50% of the net revenue
Issuer recognizes from support services sold by Issuer but provided by Pure.
The initial term of the License and Marketing Agreement is five years, with an
automatic right to renew that Issuer may exercise for an additional two year
period. The License and Marketing Agreement contains customary warranty,
indemnity and confidentiality provisions. The foregoing summary of the License
and Marketing Agreement is qualified in its entirety by reference to the copy of
the License and Marketing Agreement included as Exhibit 8 to this Schedule 13D
and incorporated herein in its entirety by reference.
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP No. 04962G 10 2 Page 9 of 13 Pages
- --------------------------- ----------------------------
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
As a result of and subject to the Voting Agreement, Pure has shared power
to vote an aggregate of 783,839 shares of Issuer Common Stock for the limited
purposes described in Item 4 above, and such shares constitute approximately
5.5% of the issued and outstanding shares of Issuer Common Stock as of June 1,
1996. To the extent that Pure, as permitted by the Voting Agreement, requests
proxies to vote all of the shares of Issuer Common Stock subject to the Voting
Agreement and such proxies are granted pursuant to the Voting Agreement, Pure
would have sole voting power with respect to such shares.
If pursuant to the Stock Option Agreement the Option becomes exercisable,
Pure would have the right to acquire up to 2,149,038 shares of Issuer Common
Stock. If acquired, Pure would have sole voting and dispositive power over such
shares, and such shares would constitute approximately 15% of the issued and
outstanding shares of Issuer Common Stock as of June 1, 1996.
As a result of the Voting Agreement and if the Option is exercised, Pure
may be deemed to beneficially own an aggregate of 2,932,877 shares of Issuer
Common Stock, or 17.8% of the issued and outstanding shares of Issuer Common
Stock as of June 1, 1996.
To Pure's knowledge, except for Reed Hastings who owns 100 shares of Issuer
Common Stock, no shares of Issuer Common Stock are beneficially owned by any of
the persons named in Schedule A. In addition, Pure has not affected any
transaction in Issuer Common Stock during the past 60 days and, except for Reed
Hastings who sold 300 shares of Issuer Common Stock in an open market
transaction on May 7, 1996 at a per share price of $54.00, to Pure's knowledge,
none of the person named in Schedule A has affected any transaction in Issuer
Common Stock during the past 60 days.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF ISSUER.
Other than as described herein, to Pure's knowledge, there are no
contracts, arrangements, understandings or relationships (legal or otherwise)
among the persons named in Item 2 and between such persons and any person with
respect to any securities of Issuer, including but not limited to transfer or
voting of any of the securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees or profits, division or profits or loss,
or the giving or withholding or proxies.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
The following documents are filed as exhibits:
1. Agreement and Plan or Reorganization dated June 6, 1996 by and among
Pure Software Inc., a Delaware corporation, CST Acquisition
Corporation, a Massachusetts corporation and
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP No. 04962G 10 2 Page 10 of 13 Pages
- --------------------------- ----------------------------
wholly-owned subsidiary of Pure Software Inc., and Atria Software,
Inc., a Massachusetts corporation.
2. Participation Agreement dated June 6, 1996 by and among Pure Software
Inc., a Delaware corporation, CST Acquisition Corporation, a
Massachusetts corporation, and certain stockholders of Atria Software,
Inc., a Massachusetts corporation.
3. Participation Agreement dated June 6, 1996 by and among Atria
Software, Inc., a Massachusetts corporation, and certain stockholders
of Pure Software Inc., a Delaware corporation.
4. Stock Option Agreement dated June 6, 1996 by and between Atria
Software, Inc., a Massachusetts corporation and Pure Software Inc., a
Delaware corporation.
5. Stock Option Agreement dated June 6, 1996 by and between Pure Software
Inc., a Delaware corporation, and Atria Software, Inc., a
Massachusetts corporation.
6. Form of Affiliate Agreement dated June 6, 1996 by and among Pure
Software Inc., a Delaware corporation, and certain stockholders of
Pure Software Inc., a Delaware corporation.
7. Form of Affiliate Agreement dated June 6, 1996 by and among Pure
Software Inc., a Delaware corporation, and certain stockholders of
Atria Software, Inc., a Massachusetts corporation.
8. License and Marketing Agreement dated June 6, 1996 between Pure
Software Inc., a Delaware corporation, and Atria Software, Inc., a
Massachusetts corporation.
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP No. 04962G 10 2 Page 11 of 13 Pages
- --------------------------- ----------------------------
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 17, 1996
PURE SOFTWARE INC.
By: /s/ Chuck Bay
---------------
Title: Vice President, Finance, Chief
Financial Officer, General Counsel
and Secretary
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP No. 04962G 10 2 Page 12 of 13 Pages
- --------------------------- ----------------------------
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICER OF
PURE SOFTWARE INC.
Present Principal
Occupation Including
Name and Title Name of Employer Citizenship
- ----------------- ------------------ -----------
Reed Hastings Chairman of the Board of Directors, President U.S.
and Chief Executive Officer of Pure
Aki Fjuimura Director and Vice President, Systems Business U.S.
Unit and Customer Satisfaction Group of Pure
Chuck Bay Vice President, Finance, Chief Financial Officer, U.S.
General Counsel and Secretary of Pure
Audrey MacLean Director of Pure and Private Investor, 21100 U.S.
Saratoga Hills Road, Saratoga, California
95070
Andrew S. Rachleff Director of Pure and General Partner, MPAE V U.S.
Management Company, L.P., 2480 Sand Hill
Road, Suite 200, Menlo Park, California 94025
Thomas A. Jermoluk Director of Pure and President and Chief Operating U.S.
Officer of Silicon Graphics, Inc., 2011 North
Shoreline Blvd., Mountain View, California 94043
Larry W. Sonsini Director of Pure and Member and Chairman of the U.S.
Executive Committee, Wilson, Sonsini, Goodrich
& Rosati, 650 Page Mill Road, Palo Alto, California
94307
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP No. 04962G 10 2 Page 13 of 13 Pages
- --------------------------- ----------------------------
SCHEDULE B
<TABLE>
<CAPTION>
Issuer Common Stock Held
Stockholder of Record as of June 1, 1996
- -------------------------- ----------------------------
<S> <C>
Paul H. Levine 295,000
Elliot M. Katzman 90,000
John C. Leary 35,000
David B. Leblang 248,000
Paul J. Ferri 10,452
Robert D. Pavey 11,632
Norris Evans 0
Gardner C. Hendrie 79,391
David A. Litwack 0
Louis J. Volpe 14,364
-------
TOTAL: 783,839
=======
</TABLE>
<PAGE>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
1 Agreement and Plan or Reorganization dated June 6,
1996 by and among Pure Software Inc., a Delaware
corporation, CST Acquisition Corporation, a
Massachusetts corporation and wholly-owned subsidiary
of Pure Software Inc., and Atria Software, Inc.,
a Massachusetts corporation.
2 Participation Agreement dated June 6, 1996 by and
among Pure Software Inc., a Delaware corporation,
CST Acquisition Corporation, a Massachusetts
corporation, and certain stockholders of Atria
Software, Inc., a Massachusetts corporation.
3 Participation Agreement dated June 6, 1996 by and
among Atria Software, Inc., a Massachusetts
corporation, and certain stockholders of Pure Software
Inc., a Delaware corporation.
4 Stock Option Agreement dated June 6, 1996 by and
between Atria Software, Inc., a Massachusetts
corporation and Pure Software Inc., a Delaware
corporation.
5 Stock Option Agreement dated June 6, 1996 by and
between Pure Software Inc., a Delaware corporation,
and Atria Software, Inc., a Massachusetts corporation.
6 Form of Affiliate Agreement dated June 6, 1996 by
and among Pure Software Inc., a Delaware corporation,
and certain stockholders of Pure Software a Delaware
corporation.
7 Form of Affiliate Agreement dated June 6, 1996 by and
among Pure Software Inc., a Delaware corporation, and
certain stockholders of Atria Software, Inc., a
Massachusetts corporation.
8 License and Marketing Agreement dated June 6, 1996
between Pure Software Inc., a Delaware corporation,
and Atria Software, Inc., a Massachusetts corporation.
<PAGE>
EXHIBIT 1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PURE SOFTWARE INC.
CST ACQUISITION CORPORATION
AND
ATRIA SOFTWARE, INC.
Dated as of June 6, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - THE MERGER...................................................... 2
1.1 The Merger....................................................... 2
1.2 Effective Time; Closing.......................................... 2
1.3 Effect of the Merger............................................. 2
1.4 Articles of Organization; Bylaws................................. 2
1.5 Directors and Officers........................................... 3
1.6 Effect on Capital Stock.......................................... 3
1.7 Dissenting Shares................................................ 4
1.8 Surrender of Certificates........................................ 4
1.9 No Further Ownership Rights in East Capital Stock................ 6
1.10 Lost, Stolen or Destroyed Certificates........................... 6
1.11 Tax and Accounting Consequences.................................. 6
1.12 Taking of Necessary Action; Further Action....................... 6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF EAST......................... 7
2.1 Organization of East............................................. 7
2.2 East Capital Structure........................................... 7
2.3 Obligations With Respect to Capital Stock........................ 7
2.4 Authority........................................................ 8
2.5 SEC Filings; East Financial Statements........................... 9
2.6 Absence of Certain Changes or Events............................. 10
2.7 Tax.............................................................. 10
2.8 Intellectual Property............................................ 10
2.9 Compliance; Permits; Restrictions................................ 11
2.10 Litigation....................................................... 11
2.11 Brokers' and Finders' Fees....................................... 12
2.12 Employee Benefit Plans........................................... 12
2.13 Absence of Liens and Encumbrances; Condition of Equipment........ 12
2.14 Environmental Matters............................................ 12
2.15 Labor Matters.................................................... 13
2.16 Agreements, Contracts and Commitments............................ 13
2.17 Pooling of Interests............................................. 15
2.18 Change of Control Payments....................................... 15
2.19 Statements; Proxy Statement/Prospectus........................... 15
2.20 Board Approval................................................... 15
2.21 Fairness Opinion................................................. 16
2.22 Minute Books..................................................... 16
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF WEST AND MERGER SUB......... 16
3.1 Organization of West............................................. 16
3.2 West Capital Structure........................................... 16
3.3 Obligations With Respect to Capital Stock........................ 17
3.4 Authority........................................................ 17
3.6 SEC Filings; West Financial Statements........................... 19
3.7 Absence of Certain Changes or Events............................. 19
3.8 Taxes............................................................ 20
3.9 Intellectual Property............................................ 20
3.10 Compliance; Permits; Restrictions................................ 20
3.11 Litigation....................................................... 21
3.12 Brokers' and Finders' Fees....................................... 21
3.13 Employee Benefit Plans........................................... 21
3.14 Absence of Liens and Encumbrances; Condition of Equipment........ 22
3.15 Environmental Matters............................................ 22
3.16 Labor Matters.................................................... 22
3.17 Agreements, Contracts and Commitments............................ 23
3.18 Pooling of Interests............................................. 24
3.19 Change of Control Payments....................................... 24
3.20 Statements; Proxy Statement/Prospectus........................... 24
3.21 Board Approval................................................... 25
3.22 Fairness Opinion................................................. 25
3.23 Minute Books..................................................... 25
ARTICLE IV - CONDUCT PRIOR TO THE EFFECTIVE TIME............................ 25
4.1 Conduct of Business.............................................. 25
ARTICLE V - ADDITIONAL AGREEMENTS........................................... 27
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings 27
5.2 Meetings of Stockholders......................................... 28
5.3 Access to Information; Confidentiality........................... 29
5.4 No Solicitation.................................................. 29
5.5 Public Disclosure................................................ 32
5.6 Legal Requirements............................................... 32
5.7 Third Party Consents............................................. 32
5.8 FIRPTA........................................................... 32
5.9 Notification of Certain Matters.................................. 32
5.10 Best Efforts and Further Assurances.............................. 33
5.11 Stock Options; Employee Stock Purchase Plan...................... 33
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
5.12 Form S-8......................................................... 34
5.13 Indemnification and Insurance.................................... 34
5.14 Tax-Free Reorganization.......................................... 35
5.15 NMS Listing...................................................... 35
5.16 West Affiliate Agreement......................................... 35
5.17 East Affiliate Agreement......................................... 35
5.18 Board of Directors of West....................................... 35
5.19 Committees of the Board of Directors of West..................... 36
5.20 Headquarters of East............................................. 36
5.21 Officers of West................................................. 36
5.22 Change of Name................................................... 36
5.23 Option Plan...................................................... 36
ARTICLE VI - CONDITIONS TO THE MERGER....................................... 36
6.1 Conditions to Obligations of Each Party to Effect the Merger..... 36
6.2 Additional Conditions to Obligations of East..................... 37
6.3 Additional Conditions to the Obligations of West and Merger Sub.. 38
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER............................. 38
7.1 Termination...................................................... 38
7.2 Notice of Termination; Effect of Termination..................... 40
7.3 Fees and Expenses................................................ 41
7.4 Amendment........................................................ 41
7.5 Extension; Waiver................................................ 42
ARTICLE VIII - GENERAL PROVISIONS........................................... 42
8.1 Non-Survival of Representations and Warranties................... 42
8.2 Notices.......................................................... 42
8.3 Interpretation; Knowledge........................................ 43
8.4 Counterparts..................................................... 43
8.5 Entire Agreement................................................. 43
8.6 Severability..................................................... 44
8.7 Other Remedies; Specific Performance............................. 44
8.8 Governing Law.................................................... 44
8.9 Rules of Construction............................................ 44
8.10 Assignment....................................................... 44
-iii-
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit A West Stock Option Agreement
Exhibit B East Stock Option Agreement
Exhibit C West Voting Agreement
Exhibit D East Voting Agreement
Exhibit E West Affiliate Agreement
Exhibit F East Affiliate Agreement
-iv-
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
---------
entered into as of June 6th, 1996 among Pure Software Inc., a Delaware
corporation ("West"), CST Acquisition Corporation, a Massachusetts corporation
----
and a wholly-owned subsidiary of West ("Merger Sub"), and Atria Software, Inc.,
----------
a Massachusetts corporation ("East").
----
RECITALS
--------
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Massachusetts Business Corporation Law ("Massachusetts
-------------
Law"), West and East will enter into a business combination transaction pursuant
- ---
to which Merger Sub will merge with and into East (the "Merger").
------
B. The Board of Directors of West (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of West
and fair to, and in the best interests of, West and its stockholders, (ii) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) has recommended that the stockholders of West vote to
approve the issuance of shares of West Common Stock (as defined below) to the
stockholders of East pursuant to the terms of the Merger.
C. The Board of Directors of East (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of East
and fair to, and in the best interests of, East and its stockholders, (ii) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) has recommended the approval of this Agreement by the
stockholders of East.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to West's and East's willingness to enter into this Agreement,
West shall execute and deliver a Stock Option Agreement in favor of East in
substantially the form attached hereto as Exhibit A (the "West Stock Option
-----------------
Agreement") and East shall execute and deliver a Stock Option Agreement in favor
- ---------
of West in substantially the form attached hereto as Exhibit B (the "East Stock
----------
Option Agreement" and, together with the West Stock Option Agreement, the "Stock
- ---------------- -----
Option Agreements") . The Board of Directors of West and East have each
- -----------------
approved the Stock Option Agreements.
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to West's and East's willingness to enter into this Agreement,
the Chief Executive Officer of West and certain other affiliates of West shall
enter into a Voting Agreement in substantially the form attached hereto as
Exhibit C (the "West Voting Agreements"), and the Chief Executive Officer of
----------------------
East and certain other affiliates of East shall enter into a Voting Agreement in
substantially the form attached hereto as Exhibit D (the "East Voting
-----------
Agreements" and, collectively with the West Voting Agreements, the "Voting
- ---------- ------
Agreements").
- ----------
F. West, East and Merger Sub desire to make certain representations and
warranties and other agreements in connection with the Merger.
G. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
----
<PAGE>
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
----------
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Massachusetts Law, Merger Sub shall be merged with and
into East, the separate corporate existence of Merger Sub shall cease and East
shall continue as the surviving corporation. East as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
---------
Corporation."
- -----------
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
-----------------------
the parties hereto shall cause the Merger to be consummated by filing Articles
of Merger (the "Articles of Merger") with the Secretary of State of the
------------------
Commonwealth of Massachusetts in accordance with the relevant provisions of
Massachusetts Law (the time of such filing (or such later time as may be agreed
in writing by the parties and specified in the Articles of Merger) being the
"Effective Time") as soon as practicable on or after the Closing Date (as herein
- ---------------
defined). Unless the context otherwise requires, the term "Agreement" as used
---------
herein refers collectively to this Agreement and the Articles of Merger. The
closing of the Merger (the "Closing") shall take place at the offices of Wilson,
-------
Sonsini, Goodrich & Rosati, Professional Corporation at a time and date to be
specified by the parties, which shall be no later than the second business day
after the satisfaction or waiver of the conditions set forth in Article VI, or
at such other time, date and location as the parties hereto agree in writing
(the "Closing Date").
------------
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in this Agreement and the applicable provisions of
Massachusetts Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of East and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of East and Merger Sub shall
become the debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Organization; Bylaws.
--------------------------------
(a) At the Effective Time, the Articles of Organization of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the Articles of
Organization of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Organization; provided, however, that at the
-------- -------
Effective Time the Articles of Organization of the Surviving Corporation shall
be amended so that the name of the Surviving Corporation shall be "Atria
Software, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
-2-
<PAGE>
1.5 Directors and Officers. The directors of Merger Sub immediately
----------------------
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, until their respective successors are duly elected or appointed and
qualified. The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, until their
successors are duly elected or appointed or qualified.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
-----------------------
Merger and without any action on the part of Merger Sub, East or the holders of
any of the following securities:
(a) Conversion of East Capital Stock. Each share of Common Stock, par
--------------------------------
value $.01 per share, of East (the "East Capital Stock") issued and outstanding
------------------
immediately prior to the Effective Time (other than any shares of East Capital
Stock to be canceled pursuant to Section 1.6(b) and any Dissenting Shares (as
defined in and to the extent provided in Section 1.7(a)) will be canceled and
extinguished and automatically converted (subject to Sections 1.6(e) and (f))
into the right to receive 1.544615 (the "Exchange Ratio") shares of Common
--------------
Stock, par value $.0001 per share, of West (the "West Common Stock") upon
-----------------
surrender of the certificate representing such share of East Capital Stock in
the manner provided in Section 1.8 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond, if required) in
the manner provided in Section 1.10).
(b) Cancellation of West-Owned Stock. Each share of East Capital
--------------------------------
Stock held in the treasury of East or owned by Merger Sub, West or any direct or
indirect wholly owned subsidiary of East or of West immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Stock Options; Employee Stock Purchase Plan. At the Effective
-------------------------------------------
Time all options to purchase East Capital Stock then outstanding under East's
1990 Stock Option Plan, 1994 Stock Plan and 1994 Non-Employee Director Stock
Option Plan (collectively, the "East Stock Option Plans") shall be assumed by
-----------------------
West in accordance with Section 5.11 hereof. In accordance with the terms of
the East Stock Option Plans, the exercisability of certain options and lapse of
repurchase rights will accelerate (by 2 1/2 years) at the Effective Time. At
the Effective Time, in accordance with the terms of East's Employee Stock
Purchase Plan (the "East Employee Stock Purchase Plan"), all rights to purchase
---------------------------------
shares of East Capital Stock under the East Employee Stock Purchase Plan shall
be converted into rights to purchase a number of shares of West Common Stock as
provided in the East Employee Stock Purchase Plan (based on the Exchange Ratio),
all such rights shall be assumed by West and the offering period in effect under
the East Employee Stock Purchase Plan immediately prior to the Effective Time
shall not be terminated early.
(d) Capital Stock of Merger Sub. Each share of Common Stock, par
---------------------------
value $.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of Common Stock, par value $.01 per share, of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
-3-
<PAGE>
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
-----------------------------
adjusted to reflect fully the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities convertible
into West Common Stock or East Capital Stock), reorganization, recapitalization
or other like change with respect to West Common Stock or East Capital Stock
occurring on or after the date hereof and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of West Common Stock
-----------------
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of East Capital Stock who would otherwise be entitled to a fraction of a
share of West Common Stock (after aggregating all fractional shares of West
Common Stock to be received by such holder) shall receive from West an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of a share of West Common
Stock for the ten most recent days that West Common Stock has traded ending on
the trading day immediately prior to the Effective Time, as reported on the
Nasdaq National Market.
1.7 Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the contrary,
the shares of any holder of East Capital Stock who has demanded and perfected
appraisal rights for such shares in accordance with Massachusetts Law and who,
as of the Effective Time, has not effectively withdrawn or lost such appraisal
rights ("Dissenting Shares"), shall not be converted into or represent a right
-----------------
to receive West Common Stock pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by Massachusetts Law.
(b) Notwithstanding the foregoing, if any holder of shares of East
Capital Stock who demands appraisal of such shares under Massachusetts Law shall
effectively withdraw the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive West
Common Stock, without interest thereon, upon surrender of the certificate
representing such shares.
(c) East shall give West (i) prompt notice of any written demands for
appraisal of any shares of East Capital Stock, withdrawals of such demands, and
any other instruments served pursuant to Massachusetts Law and received by East
which relate to any such demand for appraisal and (ii) the opportunity to
participate in all negotiations and proceedings which take place prior to the
Effective Time with respect to demands for appraisal under Massachusetts Law.
East shall not, except with the prior written consent of West or as may be
required by applicable law, voluntarily make any payment with respect to any
demands for appraisal of East Capital Stock or offer to settle or settle any
such demands.
1.8 Surrender of Certificates.
-------------------------
(a) Exchange Agent. West shall select an institution reasonably
--------------
satisfactory to East to act as the exchange agent (the "Exchange Agent") in the
--------------
Merger.
-4-
<PAGE>
(b) West to Provide Common Stock. Promptly after the Effective Time,
----------------------------
West shall make available to the Exchange Agent for exchange in accordance with
this Article I, the shares of West Common Stock issuable pursuant to Section 1.6
in exchange for outstanding shares of East Capital Stock, and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 1.6(f)
and any dividends or distributions and holders of shares of East Capital Stock
may be entitled pursuant to Section 1.8(d).
(c) Exchange Procedures. Promptly after the Effective Time, West
-------------------
shall cause the Exchange Agent to mail to each holder of record (as of the
Effective Time) of a certificate or certificates (the "Certificates") which
------------
immediately prior to the Effective Time represented outstanding shares of East
Capital Stock whose shares were converted into the right to receive shares of
West Common Stock pursuant to Section 1.6, cash in lieu of any fractional shares
pursuant to Section 1.6(f) and any dividends or other distributions pursuant to
Section 1.8(d), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as West may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of West Common Stock, cash in lieu
of any fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.8(d). Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by West, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of West Common Stock, payment in lieu of
fractional shares which such holder has the right to receive pursuant to Section
1.6(f) and any dividends or distributions payable pursuant to Section 1.8(d),
and the Certificate so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Certificate will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.8(d) as to the
payment of dividends, to evidence the ownership of the number of full shares of
West Common Stock into which such shares of East Capital Stock shall have been
so converted and the right to receive an amount in cash in lieu of the issuance
of any fractional shares in accordance with Section 1.6(f) and any dividends or
distributions payable pursuant to Section 1.8(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions declared or made after the date of this Agreement with
respect to West Common Stock with a record date after the Effective Time will be
paid to the holder of any unsurrendered Certificate with respect to the shares
of West Common Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder thereof certificates representing whole shares of West Common Stock
issued in exchange therefor, without interest, along with the amount of
dividends or other distributions with a record date after the Effective Time
payable with respect to such whole shares of West Common Stock.
(e) Transfers of Ownership. If any certificate for shares of West
----------------------
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
-5-
<PAGE>
exchange will have paid to West or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
West Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of West or any agent
designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.8, neither the Exchange Agent, West, the Surviving Corporation nor any
party hereto shall be liable to a holder of shares of West Common Stock or East
Capital Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in East Capital Stock. All shares of West
-------------------------------------------------
Common Stock issued upon the surrender for exchange of shares of East Capital
Stock in accordance with the terms hereof (including any cash paid in respect
thereof pursuant to Section 1.6(f) and 1.8(d)) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of East
Capital Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of East Capital Stock which were
outstanding immediately prior to the Effective Time. If after the Effective
Time Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of West
Common Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.8(d); provided, however, that West may, in its discretion and as a condition
-------- -------
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against West or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.11 Tax and Accounting Consequences. It is intended by the parties
-------------------------------
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations. It is also intended by the parties hereto
that the Merger shall qualify for accounting treatment as a pooling of
interests.
1.12 Taking of Necessary Action; Further Action. If, at any time
------------------------------------------
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of East and Merger Sub, the officers and directors of East
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is consistent with this Agreement.
-6-
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EAST
East represents and warrants to West and Merger Sub, subject to the
exceptions specifically disclosed in writing in the disclosure letter supplied
by East to West (the "East Schedules"), as follows:
--------------
2.1 Organization of East. East and each of its material subsidiaries
--------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a Material Adverse Effect (as defined
below) on East. East has delivered to West a true and complete list of all of
East's subsidiaries, together with the jurisdiction of incorporation of each
subsidiary and East's equity interest therein. East has delivered or made
available a true and correct copy of the Articles of Organization and Bylaws of
East and similar governing instruments of its material subsidiaries, each as
amended to date, to counsel for West. When used in connection with East, the
term "Material Adverse Effect" means, for purposes of this Agreement, any
-----------------------
change, event or effect that is materially adverse to the business, assets
(including intangible assets), financial condition or results of operations of
East and its subsidiaries taken as a whole.
2.2 East Capital Structure. The authorized capital stock of East
----------------------
consists of 50,000,000 shares of Common Stock, par value $0.01 per share, of
which there were 14,320,389 shares issued and outstanding as of June 1, 1996 and
2,000,000 shares of Preferred Stock, par value $1.00 per share, of which no
shares are issued or outstanding. All outstanding shares of East Capital Stock
are duly authorized, validly issued, fully paid and non-assessable and are not
subject to preemptive rights created by statute, the Articles of Organization or
Bylaws of East or any agreement or document to which East is a party or by which
it is bound. As of June 1, 1996, East had reserved an aggregate of 2,408,648
shares of Common Stock, net of exercises, for issuance to employees, consultants
and non-employee directors pursuant to the East Stock Option Plans, under which
options are outstanding for an aggregate of 1,706,737 shares. All shares of
East Capital Stock subject to issuance as aforesaid, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable. The East
Schedules list each outstanding option to acquire shares of the Common Stock of
East at June 1, 1996, the name of the holder of such option, the number of
shares subject to such option, the exercise price of such option, the number of
shares as to which such option will have vested at such date and whether the
exercisability of such option will be accelerated in any way by the transactions
contemplated by this Agreement or for any other reason, and indicate the extent
of acceleration, if any. As of June 1, 1996, there were 143 participants in
East's 1994 Employee Stock Purchase Plan (the "East Employee Stock Purchase
Plan"). ----------------------------
- ----
2.3 Obligations With Respect to Capital Stock. Except as set forth
-----------------------------------------
in Section 2.2, there are no equity securities of any class of East, or any
securities exchangeable or convertible into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. Except for securities
East owns, directly or indirectly through one or more subsidiaries, there are no
equity securities of any class of any subsidiary of East, or any security
exchangeable or convertible into or
-7-
<PAGE>
exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except as set forth in Section 2.2, there are no options,
warrants, equity securities, calls, rights (including preemptive rights),
commitments or agreements of any character to which East or any of its
subsidiaries is a party or by which it is bound obligating East or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares of capital stock of East or any of its
subsidiaries or obligating East or any of its subsidiaries to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. There are no registration
rights and, to the knowledge of East there are no voting trusts, proxies or
other agreements or understandings with respect to any equity security of any
class of East or with respect to any equity security of any class of any of its
subsidiaries.
2.4 Authority.
---------
(a) East has all requisite corporate power and authority to enter into
this Agreement and the East Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby, and
the execution and delivery of the East Stock Option Agreement and the
consummation of the transactions contemplated thereby, have been duly authorized
by all necessary corporate action on the part of East, subject only to the
approval of this Agreement by East's stockholders and the filing and recordation
of the Articles of Merger pursuant to Massachusetts Law. A vote of the holders
of at least a majority of the outstanding shares of the East Capital Stock is
required for East's stockholders to approve this Agreement. This Agreement and
the East Stock Option Agreement have been duly executed and delivered by East
and, assuming the due authorization, execution and delivery by West and, if
applicable, Merger Sub, constitute the valid and binding obligations of East,
enforceable in accordance with their terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of equity.
The execution and delivery of this Agreement and the East Stock Option Agreement
by East do not, and the performance of this Agreement and the East Stock Option
Agreement by East will not, (i) conflict with or violate the Articles of
Organization or Bylaws of East or the equivalent organizational documents of any
of its subsidiaries, (ii) subject to obtaining the approval of East's
stockholders of the Merger as contemplated in Section 5.2 and compliance with
the requirements set forth in Section 2.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to East or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected, or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair East's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of East or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which East or any of its
subsidiaries is a party or by which East or any of its subsidiaries or its or
any of their respective properties are bound or affected, except, with respect
to clauses (ii) and (iii), for any such conflicts, violations, defaults or other
occurrences that would not have a Material Adverse Effect on East. The East
Schedules list all material consents, waivers and approvals under any of East's
or any of its subsidiaries' agreements, contracts, licenses or leases required
to be obtained in connection with the consummation of the transactions
contemplated hereby.
-8-
<PAGE>
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
-------------------
required by or with respect to East in connection with the execution and
delivery of this Agreement and the East Stock Option Agreement or the
consummation of the transactions contemplated hereby or thereby, except for (i)
the filing of a Form S-4 Registration Statement (the "Registration Statement")
----------------------
with the Securities and Exchange Commission ("SEC") in accordance with the
---
Securities Act of 1933, as amended (the "Securities Act"), (ii) the filing of
--------------
the Articles of Merger with the Secretary of State of the Commonwealth of
Massachusetts, (iii) the filing of the Proxy Statement (as defined in Section
2.19) with the SEC in accordance with the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (iv) the filing of a Current Report on Form 8-K
------------
with the SEC, (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country and (vi)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on East or
West or have a material adverse effect on the ability of the parties to
consummate the Merger. The provisions of the Massachusetts Control Share
Acquisition Act, Massachusetts Statutes Chapter 110D, will not apply to this
Agreement, the Merger or the transactions contemplated hereby (including,
without limitation, the transactions contemplated by the Voting Agreements).
2.5 SEC Filings; East Financial Statements.
--------------------------------------
(a) East has filed all forms, reports and documents required to be
filed with the SEC since May 13, 1994, and has made available to West such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports and documents (including those that East may file subsequent to
the date hereof) are referred to herein as the "East SEC Reports." As of their
----------------
respective dates, the East SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such East SEC
Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of East's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in East SEC Reports (the "East
----
Financials"), including any East SEC Reports filed after the date hereof until
- ----------
the Closing, (x) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (y) was prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
----
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q under the Exchange Act) and (z) fairly
presented the consolidated financial position of East and its subsidiaries as at
the respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not, or are not expected to be, material in amount. The
balance sheet of East contained in East SEC Reports as of March 31, 1996 is
hereinafter referred
-9-
<PAGE>
to as the "East Balance Sheet." Except as disclosed in the East Financials,
------------------
neither East nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the consolidated financial statements prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of East and its
subsidiaries taken as a whole, except liabilities (i) provided for in the East
Balance Sheet, or (ii) incurred since the date of the East Balance Sheet in the
ordinary course of business consistent with past practices.
(c) East has heretofore furnished to West a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by East with the SEC pursuant to the
Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the date of the East
------------------------------------
Balance Sheet through the date of this Agreement, there has not been: (i) any
Material Adverse Effect on East, (ii) any material change by East in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, or (iii) any revaluation by East of any of its assets having a
Material Adverse Effect on East, including, without limitation, writing down the
value of capitalized software or inventory or writing off notes or accounts
receivable other than in the ordinary course of business.
2.7 Taxes. East and each of its subsidiaries has filed all tax
-----
returns required to be filed by any of them and has paid (or East has paid on
its behalf), or has set up an adequate reserve for the payment of, all material
taxes required to be paid as shown on such returns, and the most recent
financial statements contained in the East SEC Reports reflect an adequate
reserve for all material taxes payable by East and its subsidiaries accrued
through the date of such financial statements. Except as reasonably would not be
expected to have a Material Adverse Effect on East, no deficiencies for any
taxes have been proposed, asserted or assessed against East or any of its
subsidiaries. For the purpose of this Agreement, the term "tax" shall include
all Federal, state, local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
2.8 Intellectual Property.
---------------------
(a) East and its subsidiaries own, or have the right to use, sell or
license all intellectual property necessary or required for the conduct of their
respective businesses as presently conducted (such intellectual property and the
rights thereto are collectively referred to herein as the "East IP Rights"),
--------------
except for any failure to own or have the right to use, sell or license that
would not have a Material Adverse Effect on East.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any East IP Rights (the "East IP
-------
Rights Agreements"), will not cause the forfeiture or termination or give rise
- -----------------
to a right of forfeiture or termination of any East IP Rights or
-10-
<PAGE>
impair the right of East and its subsidiaries, the Surviving Corporation or West
to use, sell or license any East IP Rights or portion thereof, except for the
occurrence of any such breach, forfeiture, termination or impairment that would
not individually or in the aggregate, result in a Material Adverse Effect on
East.
(c) (i) neither the manufacture, marketing, license, sale or intended
use of any product or technology currently licensed or sold or under development
by East or any of its subsidiaries violates any license or agreement between
East or any of its subsidiaries and any third party or infringes any
intellectual property right of any other party; and (ii) there is no pending or,
to the knowledge of East, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any East IP
Rights, nor has East received any written notice asserting that any East IP
Rights or the proposed use, sale, license or disposition thereof conflicts or
will conflict with the rights of any other party, except, with respect to
clauses (i) and (ii), for any violations, infringements, claims or litigation
that would not have a Material Adverse Effect on East.
(d) East has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in, all East IP Rights.
2.9 Compliance; Permits; Restrictions.
---------------------------------
(a) Neither East nor any of its subsidiaries is in conflict with, or
in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to East or any of its subsidiaries or by which its or any of
their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which East or any of its subsidiaries is a
party or by which East or any of its subsidiaries or its or any of their
respective properties is bound or affected, except for any conflicts, defaults
or violations which would not have a Material Adverse Effect on East. To the
knowledge of East, no investigation or review by any governmental or regulatory
body or authority is pending or threatened against East or its subsidiaries, nor
has any governmental or regulatory body or authority indicated an intention to
conduct the same, other than, in each such case, those the outcome of which
would not have a Material Adverse Effect on East.
(b) East and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of East and its subsidiaries taken as
a whole (collectively, the "East Permits"). East and its subsidiaries are in
------------
compliance with the terms of East Permits, except where the failure to so comply
would not have a Material Adverse Effect on East.
2.10 Litigation. As of the date of this Agreement, there is no
----------
action, suit, proceeding, claim, arbitration or investigation pending, or as to
which East or any of its subsidiaries has received any notice of assertion nor,
to East's knowledge, is there a threatened action, suit, proceeding, claim,
arbitration or investigation against East or any of its subsidiaries which
would have a Material Adverse Effect on East, or which in any manner challenges
or seeks to prevent, enjoin, alter or delay any of the transactions contemplated
by this Agreement.
-11-
<PAGE>
2.11 Brokers' and Finders' Fees. Except for fees payable to Wessels,
--------------------------
Arnold & Henderson pursuant to the engagement letter dated May 31, 1996, a copy
of which has been provided to West, East has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.12 Employee Benefit Plans.
----------------------
(a) With respect to each material employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) maintained or contributed to by East or any trade
-----
or business (an "ERISA Affiliate") which is under common control with East
---------------
within the meaning of Section 414 of the Code (the "East Employee Plans"), East
-------------------
has made available to West a true and complete copy of, to the extent
applicable, (i) such East Employee Plan, (ii) the most recent annual report
(Form 5500), (iii) each trust agreement related to such East Employee Plan, (iv)
the most recent summary plan description for each East Employee Plan for which
such a description is required, (v) the most recent actuarial report relating to
any East Employee Plan subject to Title IV of ERISA and (vi) the most recent
United States Internal Revenue Service ("IRS") determination letter issued with
---
respect to any East Employee Plan.
(b) Each East Employee Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination from the IRS
covering the provisions of the Tax Reform Act of 1986 stating that such East
Employee Plan is so qualified and nothing has occurred since the date of such
letter that could reasonably be expected to affect the qualified status of such
plan. Each East Employee Plan has been operated in all material respects in
accordance with its terms and the requirements of applicable law. Neither East
nor any ERISA Affiliate of East has incurred or is reasonably expected to incur
any material liability under Title IV of ERISA in connection with any East
Employee Plan.
2.13 Absence of Liens and Encumbrances; Condition of Equipment. East
---------------------------------------------------------
and each of its subsidiaries has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its material
tangible properties and assets, real, personal and mixed, used in its business,
free and clear of any liens or encumbrances except as reflected in the East
Financials and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which would not have a Material
Adverse Effect on East.
2.14 Environmental Matters.
---------------------
(a) Hazardous Material. Except as would not have a Material Adverse
------------------
Effect on East, no underground storage tanks and no amount of any substance that
has been designated by any Governmental Entity or by applicable federal, state
or local law to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, (a "Hazardous
---------
-12-
<PAGE>
Material"), but excluding office and janitorial supplies, are present, as a
- --------
result of the deliberate actions of East or any of its subsidiaries, or, to
East's knowledge, as a result of any actions of any third party or otherwise,
in, on or under any property, including the land and the improvements, ground
water and surface water thereof, that East or any of its subsidiaries has at any
time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not have a
------------------------------
Material Adverse Effect on East, neither East nor any of its subsidiaries has
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has East or any of its subsidiaries disposed of,
transported, sold, or manufactured any product containing a Hazardous Material
(collectively "Hazardous Materials Activities") in violation of any rule,
------------------------------
regulation, treaty or statute promulgated by any Governmental Entity in effect
prior to or as of the date hereof to prohibit, regulate or control Hazardous
Materials or any Hazardous Material Activity.
(c) Permits. East and its subsidiaries currently hold all
-------
environmental approvals, permits, licenses, clearances and consents (the "East
----
Environmental Permits") necessary for the conduct of East's and its
- ---------------------
subsidiaries' Hazardous Material Activities and other businesses of East and its
subsidiaries as such activities and businesses are currently being conducted,
except where the failure to so hold would not have a Material Adverse Effect on
East.
(d) Environmental Liabilities. No material action, proceeding,
-------------------------
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to East's knowledge, threatened concerning any East Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of East or any of
its subsidiaries. East is not aware of any fact or circumstance which could
involve East or any of its subsidiaries in any environmental litigation or
impose upon East or any of its subsidiaries any environmental liability that
would have a Material Adverse Effect on East.
2.15 Labor Matters. To East's knowledge, there are no activities or
-------------
proceedings of any labor union to organize any employees of East or any of its
subsidiaries and there are no strikes, or material slowdowns, work stoppages or
lockouts, or threats thereof by or with respect to any employees of East or any
of its subsidiaries. East and its subsidiaries are and have been in compliance
with all applicable laws regarding employment practices, terms and conditions of
employment, and wages and hours (including, without limitation, ERISA (as
defined below), WARN or any similar state or local law), except for any
noncompliance that would not have a Material Adverse Effect on East.
2.16 Agreements, Contracts and Commitments. Except as set forth in
-------------------------------------
the East Schedules, neither East nor any of its subsidiaries is a party to or is
bound by:
(a) any collective bargaining agreements;
(b) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other employee benefit plans
or arrangements;
-13-
<PAGE>
(c) any employment or consulting agreement, contract or commitment
with any officer or director level employee, not terminable by East or any of
its subsidiaries on thirty days notice without liability, except to the extent
general principles of wrongful termination law may limit East's or any of its
subsidiaries' ability to terminate employees at will;
(d) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(e) any agreement of indemnification or guaranty not entered into in
the ordinary course of business other than indemnification agreements between
East or any of its subsidiaries and any of its officers or directors;
(f) any agreement, contract or commitment containing any covenant
limiting the freedom of East or any of its subsidiaries to engage in any line of
business or compete with any person;
(g) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $150,000 and not
cancelable without penalty;
(h) any agreement, contract or commitment currently in force relating
to the disposition or acquisition of assets not in the ordinary course of
business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise;
(i) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit;
(j) any joint marketing or development agreement (excluding
agreements with resellers, value added resellers or independent software vendors
entered into in the ordinary course of business that do not permit such
resellers or vendors to modify East's or any of its subsidiaries' software
products);
(k) any distribution agreement (identifying any that contain
exclusivity provisions); or
(l) any other agreement, contract or commitment (excluding real and
personal property leases) which involve payment by East or any of its
subsidiaries under any such agreement, contract or commitment of $150,000 or
more in the aggregate and is not cancelable without penalty within thirty (30)
days.
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<PAGE>
Neither East nor any of its subsidiaries, nor to East's knowledge any
other party to an East Contract (as defined below), has breached, violated or
defaulted under, or received notice that it has breached violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which East is a party or by which it is bound of the
type described in clauses (a) through (l) above (any such agreement, contract or
commitment, an "East Contract") in such a manner as would permit any other party
-------------
to cancel or terminate any such East Contract, or would permit any other party
to seek damages, which would have a Material Adverse Effect on East.
2.17 Pooling of Interests. To the knowledge of East, based on
--------------------
consultation with its independent accountants, neither East nor any of its
directors, officers or stockholders has taken any action which would interfere
with West's ability to account for the Merger as a pooling of interests.
2.18 Change of Control Payments. The East Schedules set forth each
--------------------------
plan or agreement pursuant to which all material amounts may become payable
(whether currently or in the future) to current or former officers and directors
of East as a result of or in connection with the Merger.
2.19 Statements; Proxy Statement/Prospectus. The information
--------------------------------------
supplied by East for inclusion in the Registration Statement (as defined in
Section 2.4(b)) shall not at the time the Registration Statement is filed with
the SEC and at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by East for inclusion in the
proxy statement/prospectus to be sent to the stockholders of East and
stockholders of West in connection with the meeting of East's stockholders to
consider the approval of this Agreement (the "East Stockholders' Meeting") and
--------------------------
in connection with the meeting of West's stockholders to consider the approval
of the issuance of shares of West Common Stock pursuant to the terms of the
Merger (the "West Stockholders' Meeting") (such proxy statement/prospectus as
--------------------------
amended or supplemented is referred to herein as the "Proxy Statement") shall
---------------
not, on the date the Proxy Statement is first mailed to East's stockholders and
West's stockholders, at the time of the East Stockholders' Meeting or the West
Stockholders' Meeting and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the East
Stockholders' Meeting or the West Stockholders' Meeting which has become false
or misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time, any event relating to
East or any of its affiliates, officers or directors should be discovered by
East which should be set forth in an amendment to the Registration Statement or
a supplement to the Proxy Statement, East shall promptly inform West.
Notwithstanding the foregoing, East makes no representation or warranty with
respect to any information supplied by West or Merger Sub which is contained in
any of the foregoing documents.
2.20 Board Approval. The Board of Directors of East has, as of the
--------------
date of this Agreement, determined (i) that the Merger is fair to, and in the
best interests of East and its stockholders, and (ii) to recommend that the
stockholders of East approve this Agreement.
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<PAGE>
2.21 Fairness Opinion. East has received a written opinion from
----------------
Wessels, Arnold & Henderson, dated as of the date hereof, to the effect that as
of the date hereof, the Exchange Ratio is fair to East's stockholders from a
financial point of view and has delivered to West a copy of such opinion.
2.22 Minute Books. The minute books of East made available to
------------
counsel for West are the only minute books of East and contain a reasonably
accurate summary, in all material respects, of all meetings of directors (or
committees thereof) and stockholders or actions by written consent since the
time of incorporation of East.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WEST AND MERGER SUB
West and Merger Sub represent and warrant to East, subject to the
exceptions specifically disclosed in the disclosure letter supplied by West to
East (the "West Schedules"), as follows:
--------------
3.1 Organization of West. West and each of its material subsidiaries
--------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a Material Adverse Effect (as defined
below) on West. West has delivered to East a true and complete list of all of
West's subsidiaries, together with the jurisdiction of incorporation of each
subsidiary and West's equity interest therein. West has delivered or made
available a true and correct copy of the Certificate of Incorporation and Bylaws
of West and similar governing instruments of its material subsidiaries, each as
amended to date, to counsel for East. When used in connection with West, the
term "Material Adverse Effect" means, for purposes of this Agreement, any
-----------------------
change, event or effect that is materially adverse to the business, assets
(including intangible assets), financial condition or results of operations of
West and its subsidiaries taken as a whole.
3.2 West Capital Structure. The authorized capital stock of West
----------------------
consists of 80,000,000 shares of Common Stock, par value $0.0001 per share, of
which there were 17,640,640 shares issued and outstanding as of June 1, 1996 and
2,000,000 shares of Preferred Stock, par value $0.0001 per share, of which no
shares are issued or outstanding. The authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, per value $0.01 per share, all of
which, as of the date hereof, are issued and outstanding and are held by West.
All outstanding shares of the Common Stock of West are duly authorized, validly
issued, fully paid and non-assessable and are not subject to preemptive rights
created by statute, the Certificate of Incorporation or Bylaws of West or any
agreement or document to which West is a party or by which it is bound. As of
June 1, 1996, West had reserved an aggregate of 4,105,412 shares of Common
Stock, net of exercises, for issuance to employees, consultants and non-employee
directors pursuant to West's 1995 Stock Option Plan, its 1992 Stock Option/Stock
Issuance Plan and the Performix 1991 Incentive Stock Option Plan (collectively,
the "West Stock Option Plans"), under which options are outstanding for
-----------------------
3,400,329 shares. All shares of the Common Stock of West subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be
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<PAGE>
duly authorized, validly issued, fully paid and nonassessable. The West
Schedules list each outstanding option to acquire shares of the Common Stock
West at June 1, 1996, the name of the holder of such option, the number of
shares subject to such option, the exercise price of such option, the number of
shares as to which such option will have vested at such date and whether the
exercisability of such option will be accelerated in any way by the transactions
contemplated by this Agreement or for any other reason, and indicate the extent
of acceleration, if any. As of June 1, 1996, there were 270 participants in
West's Employee Stock Purchase Plan (the "West Employee Stock Purchase Plan").
---------------------------------
3.3 Obligations With Respect to Capital Stock. Except as set forth
-----------------------------------------
in Section 3.2, there are no equity securities of any class of West, or any
securities exchangeable or convertible into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. Except for securities
West owns, directly or indirectly through one or more subsidiaries, there are no
equity securities of any class of any subsidiary of West, or any security
exchangeable or convertible into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except as set forth in Section
3.2, there are no options, warrants, equity securities, calls, rights (including
preemptive rights), commitments or agreements of any character to which West or
any of its subsidiaries is a party or by which it is bound obligating West or
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition, of any shares of capital stock of West or
any of its subsidiaries or obligating West or any of its subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. There are no registration
rights and, to the knowledge of West there are no voting trusts, proxies or
other agreements or understandings with respect to any equity security of any
class of West or with respect to any equity security of any class of any of its
subsidiaries.
3.4 Authority.
---------
(a) Each of West and Merger Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. West has all requisite corporate power and authority to
enter into the West Stock Option Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of this Agreement and the West
Stock Option Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of West and, in the case of this Agreement, Merger Sub, subject only
to the approval of the Merger by West's stockholders as contemplated in Section
5.2 and the filing and recordation of the Articles of Merger pursuant to
Massachusetts Law. This Agreement has been duly executed and delivered by each
of West and Merger Sub and, assuming the due authorization, execution and
delivery of this Agreement by East, this Agreement constitutes the valid and
binding obligations of each of West and Merger Sub, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy and other
similar laws and general principles of equity. The West Stock Option Agreement
has been duly executed and delivered by West and, assuming the due
authorization, execution and delivery of the West Stock Option Agreement by
East, the West Stock Option Agreement constitutes the valid and binding
obligation of West, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity . The execution and delivery of this Agreement by each of
West and Merger Sub and the execution and delivery of the
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West Stock Option Agreement by West do not, and the performance of this
Agreement by each of West and Merger Sub will not, and the performance of the
West Stock Option Agreement by West will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of West or the Articles of Organization
or Bylaws of Merger Sub or the equivalent organizational documents of any of its
other subsidiaries, (ii) subject to obtaining the approval of the Merger by
West's stockholders as contemplated in Section 5.2 and compliance with the
requirements set forth in Section 3.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to West or any of
its subsidiaries (including Merger Sub) or by which its or any of their
respective properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair West's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of West or
any of its subsidiaries (including Merger Sub) pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which West or any of its subsidiaries
(including Merger Sub) is a party or by which West or any of its subsidiaries
(including Merger Sub) or its or any of their respective properties are bound or
affected, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, defaults or other occurrences that would not have a
Material Adverse Effect on West. The West Schedules list all material consents,
waivers and approvals under any of West's or any of its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to West or Merger Sub in connection with the execution and delivery of
this Agreement or the West Stock Option Agreement or the consummation of the
transactions contemplated hereby or thereby, except for (i) the filing of the
Registration Statement with the SEC in accordance with the Securities Act, (ii)
the filing of the Articles of Merger with the Secretary of State of the
Commonwealth of Massachusetts, (iii) the filing of the Proxy Statement with the
SEC in accordance with the Exchange Act, (iv) the filing of a Current Report on
Form 8-K with the SEC, (v) the listing of the West Common Stock on the Nasdaq
Stock Market, (vi) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country and (vii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on East or
West or have a material adverse effect on the ability of the parties to
consummate the Merger.
3.5 Section 203 of the Delaware General Corporation Law Not
-------------------------------------------------------
Applicable. The Board of Directors of West has taken all actions so that the
- ----------
restrictions contained in Section 203 of the Delaware General Corporation Law
applicable to a "business combination" (as defined in Section 203) will not
apply to the execution, delivery or performance of this Agreement or the Stock
Option Agreements or to the consummation of the Merger or the other transactions
contemplated by this Agreement or the Stock Option Agreements.
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3.6 SEC Filings; West Financial Statements.
--------------------------------------
(a) West has filed all forms, reports and documents required to be
filed with the SEC since August 1, 1995, and has made available to East such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports and documents (including those that West may file subsequent to
the date hereof) are referred to herein as the "West SEC Reports." As of their
----------------
respective dates, the West SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such West SEC
Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of West's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in West SEC Reports (the "West
----
Financials"), including any West SEC Reports filed after the date hereof until
- ----------
the Closing, (x) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (y) was prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
----
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q under the Exchange Act) and (z) fairly
presented the consolidated financial position of West and its subsidiaries as at
the respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not, or are not expected to be, material in amount. The
balance sheet of West contained in West SEC Reports as of March 31, 1996 is
hereinafter referred to as the "West Balance Sheet." Except as disclosed in the
------------------
West Financials, neither West nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of West and its subsidiaries taken as a whole, except liabilities (i)
provided for in the West Balance Sheet, or (ii) incurred since the date of the
West Balance Sheet in the ordinary course of business consistent with past
practices.
(c) West has heretofore furnished to East a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by West with the SEC pursuant to the
Securities Act or the Exchange Act.
3.7 Absence of Certain Changes or Events. Since the date of the West
------------------------------------
Balance Sheet through the date of this Agreement, there has not been: (i) any
Material Adverse Effect on West, (ii) any material change by West in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, or (iii) any revaluation by West of any of its assets having a
Material Adverse Effect on West, including, without limitation, writing down the
value of capitalized software or inventory or writing off notes or accounts
receivable other than in the ordinary course of business.
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<PAGE>
3.8 Taxes. West and each of its subsidiaries has filed all tax
-----
returns required to be filed by any of them and has paid (or West has paid on
its behalf), or has set up an adequate reserve for the payment of, all material
taxes required to be paid as shown on such returns and the most recent financial
statements contained in the West SEC Reports reflect an adequate reserve for all
material taxes payable by West and its subsidiaries accrued through the date of
such financial statements. Except as reasonably would not be expected to have a
Material Adverse Effect on West, no deficiencies for any taxes have been
proposed, asserted or assessed against West or any of its subsidiaries.
3.9 Intellectual Property.
---------------------
(a) West and its subsidiaries own, or have the right to use, sell or
license all intellectual property necessary or required for the conduct of their
respective businesses as presently conducted (such intellectual property and the
rights thereto are collectively referred to herein as the "West IP Rights"),
--------------
except for any failure to own or have the right to use, sell or license that
would not have a Material Adverse Effect on West.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any West IP Rights (the "West IP
-------
Rights Agreements"), will not cause the forfeiture or termination or give rise
- -----------------
to a right of forfeiture or termination of any West IP Rights or impair the
right of West and its subsidiaries to use, sell or license any West IP Rights or
portion thereof, except for the occurrence of any such breach, forfeiture,
termination or impairment that would not individually or in the aggregate,
result in a Material Adverse Effect on West.
(c) (i) neither the manufacture, marketing, license, sale or intended
use of any product or technology currently licensed or sold or under development
by West or any of its subsidiaries violates any license or agreement between
West or any of its subsidiaries and any third party or infringes any
intellectual property right of any other party; and (ii) there is no pending or,
to the knowledge of West, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any West IP
Rights, nor has West received any written notice asserting that any West IP
Rights or the proposed use, sale, license or disposition thereof conflicts or
will conflict with the rights of any other party, except, with respect to
clauses (i) and (ii), for any violations, infringements, claims or litigation
that would not have a Material Adverse Effect on West.
(d) West has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in, all West IP Rights.
3.10 Compliance; Permits; Restrictions.
---------------------------------
(a) Neither West nor any of its subsidiaries is in conflict with, or
in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to West or any of its subsidiaries or by which its or any of
their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which West or any of its subsidiaries is a
party or by which West or any of its subsidiaries or its or any of their
respective properties is bound or affected, except for any conflicts,
-20-
<PAGE>
defaults or violations which would not have a Material Adverse Effect on West.
To the knowledge of West, no investigation or review by any governmental or
regulatory body or authority is pending or threatened against West or its
subsidiaries, nor has any governmental or regulatory body or authority indicated
an intention to conduct the same, other than, in each such case, those the
outcome of which would not have a Material Adverse Effect on West.
(b) West and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of West and its subsidiaries taken as
a whole (collectively, the "West Permits"). West and its subsidiaries are in
------------
compliance with the terms of West Permits, except where the failure to so comply
would not have a Material Adverse Effect on West.
3.11 Litigation. As of the date of this Agreement, there is no
----------
action, suit, proceeding, claim, arbitration or investigation pending, or as to
which West or any of its subsidiaries has received any notice of assertion nor,
to West's knowledge, is there a threatened action, suit, proceeding, claim,
arbitration or investigation against West or any of its subsidiaries which
would have a Material Adverse Effect on West, or which in any manner challenges
or seeks to prevent, enjoin, alter or delay any of the transactions contemplated
by this Agreement.
3.12 Brokers' and Finders' Fees. Except for (i) fees payable to DMG
--------------------------
Technology Group pursuant to an engagement letter dated [ __________, 1996] a
copy of which has been provided to East and (ii) fees payable to Morgan Stanley
& Co. Incorporated pursuant to an engagement letter dated May 29, 1996, a copy
of which has also been provided to East, West has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.13 Employee Benefit Plans.
----------------------
(a) With respect to each material employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of ERISA) maintained or contributed to by West
or any trade or business which is under common control with West within the
meaning of Section 414 of the Code (the "West Employee Plans"), West has made
-------------------
available to East a true and complete copy of, to the extent applicable, (i)
such West Employee Plan, (ii) the most recent annual report (Form 5500), (iii)
each trust agreement related to such West Employee Plan, (iv) the most recent
summary plan description for each West Employee Plan for which such a
description is required, (v) the most recent actuarial report relating to any
West Employee Plan subject to Title IV of ERISA and (vi) the most recent IRS
determination letter issued with respect to any West Employee Plan.
(b) Each West Employee Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination from the IRS
covering the provisions of the Tax Reform Act of 1986 stating that such West
Employee Plan is so qualified and nothing has occurred since the date of such
letter that could reasonably be expected to affect the
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<PAGE>
qualified status of such plan. Each West Employee Plan has been operated in all
material respects in accordance with its terms and the requirements of
applicable law. Neither West nor any ERISA Affiliate of West has incurred or is
reasonably expected to incur any material liability under Title IV of ERISA in
connection with any West Employee Plan.
3.14 Absence of Liens and Encumbrances; Condition of Equipment. West
---------------------------------------------------------
and each of its subsidiaries has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its material
tangible properties and assets, real, personal and mixed, used in its business,
free and clear of any liens or encumbrances except as reflected in the West
Financials and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which would not have a Material
Adverse Effect on West.
3.15 Environmental Matters.
---------------------
(a) Hazardous Material. Except as would not have a Material Adverse
------------------
Effect on West, no underground storage tanks and no Hazardous Materials (but
excluding office and janitorial supplies) are present as a result of the
deliberate actions of West or any of its subsidiaries, or, to West's knowledge,
as a result of any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that West or any of its subsidiaries has at any time owned,
operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not have a
------------------------------
Material Adverse Effect on West, neither West nor any of its subsidiaries has
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has West or any of its subsidiaries engaged in
any Hazardous Materials Activities in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. West and its subsidiaries currently holds all
-------
environmental approvals, permits, licenses, clearances and consents (the "West
----
Environmental Permits") necessary for the conduct of West's and its
- ---------------------
subsidiaries' Hazardous Material Activities and other businesses of West and its
subsidiaries as such activities and businesses are currently being conducted,
except where the failure to so hold would not have a Material Adverse Effect on
West.
(d) Environmental Liabilities. No material action, proceeding,
-------------------------
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to West's knowledge, threatened concerning any West Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of West or any of
its subsidiaries. West is not aware of any fact or circumstance which could
involve West or any of its subsidiaries in any environmental litigation or
impose upon West or any of its subsidiaries any environmental liability that
would have a Material Adverse Effect on West.
3.16 Labor Matters. To West's knowledge, there are no activities or
-------------
proceedings of any labor union to organize any employees of West or any of its
subsidiaries and there are no strikes, or material slowdowns, work stoppages or
lockouts, or threats thereof by or with respect to any
-22-
<PAGE>
employees of West or any of its subsidiaries. West and its subsidiaries are and
have been in compliance with all applicable laws regarding employment practices,
terms and conditions of employment, and wages and hours (including, without
limitation, ERISA, WARN or any similar state or local law), except for any
noncompliance that would not have a Material Adverse Effect on West.
3.17 Agreements, Contracts and Commitments. Except as set forth in
-------------------------------------
the West Schedules, neither West nor any of its subsidiaries is a party to or is
bound by:
(a) any collective bargaining agreements;
(b) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other employee benefit plans
or arrangements;
(c) any employment or consulting agreement, contract or commitment
with any officer or director level employee, not terminable by West or any of
its subsidiaries on thirty days notice without liability, except to the extent
general principles of wrongful termination law may limit West's or any of its
subsidiaries' ability to terminate employees at will;
(d) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(e) any agreement of indemnification or guaranty not entered into in
the ordinary course of business other than indemnification agreements between
West or any of its subsidiaries and any of its officers or directors;
(f) any agreement, contract or commitment containing any covenant
limiting the freedom of West or any of its subsidiaries to engage in any line of
business or compete with any person;
(g) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $150,000 and not
cancelable without penalty;
(h) any agreement, contract or commitment currently in force relating
to the disposition or acquisition of assets not in the ordinary course of
business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise;
(i) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit;
(j) any joint marketing or development agreement (excluding
agreements with resellers, value added resellers or independent software vendors
entered into in the ordinary course of business that do not permit such
resellers or vendors to modify West's or any of its subsidiaries' software
products);
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<PAGE>
(k) any distribution agreement (identifying any that contain
exclusivity provisions); or
(l) any other agreement, contract or commitment (excluding real and
personal property leases) which involve payment by West or any of its
subsidiaries under any such agreement, contract or commitment of $150,000 or
more in the aggregate and is not cancelable without penalty within thirty (30)
days.
Neither West nor any of its subsidiaries, nor to West's knowledge any
other party to a West Contract (as defined below), has breached, violated or
defaulted under, or received notice that it has breached violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which West is a party or by which it is bound of the
type described in clauses (a) through (l) above (any such agreement, contract or
commitment, a "West Contract") in such a manner as would permit any other party
-------------
to cancel or terminate any such West Contract, or would permit any other party
to seek damages, which would have a Material Adverse Effect on West.
3.18 Pooling of Interests. To the knowledge of West, based on
--------------------
consultation with its independent accountants, neither West nor any of its
directors, officers or stockholders has taken any action which would interfere
with West's ability to account for the Merger as a pooling of interests.
3.19 Change of Control Payments. The West Schedules set forth each
--------------------------
plan or agreement pursuant to which all material amounts may become payable
(whether currently or in the future) to current or former officers and directors
of West as a result of or in connection with the Merger.
3.20 Statements; Proxy Statement/Prospectus. The information
--------------------------------------
supplied by West for inclusion in the Registration Statement (as defined in
Section 2.4(b)) shall not at the time the Registration Statement is filed with
the SEC and at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by West for inclusion in the
Proxy Statement to be sent to the stockholders of West and stockholders of East
in connection with the West Stockholders' Meeting and in connection with the
East Stockholders' Meeting shall not, on the date the Proxy Statement is first
mailed to West's stockholders and East's stockholders, at the time of the East
Stockholders' Meeting or the West Stockholders' Meeting and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the West Stockholders' Meeting or the East Stockholders' Meeting
which has become false or misleading. The Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder. If at any time prior to the Effective Time,
any event relating to West or any of its affiliates, officers or directors
should be discovered by West which should be set forth in an
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<PAGE>
amendment to the Registration Statement or a supplement to the Proxy Statement,
West shall promptly inform East. Notwithstanding the foregoing, West makes no
representation or warranty with respect to any information supplied by East
which is contained in any of the foregoing documents.
3.21 Board Approval. The Board of Directors of West has, as of the
--------------
date of this Agreement, determined to recommend that the stockholders of West
approve the issuance of the West Common Stock in the Merger.
3.22 Fairness Opinion. West has received a written opinion from each
----------------
of DMG Technology Group and Morgan Stanley & Co. Incorporated, each dated as of
the date hereof, to the effect that as of the date hereof, the Merger is fair to
West's stockholders from a financial point of view and has delivered to East a
copy of such opinions.
3.23 Minute Books. The minute books of West made available to
------------
counsel for East are the only minute books of West and contain a reasonably
accurate summary, in all material respects, of all meetings of directors (or
committees thereof) and stockholders or actions by written consent since the
time of incorporation of West.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this
-------------------
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, East (which for the purposes of
this Article 4 shall include East and each of its subsidiaries) and West (which
for the purposes of this Article 4 shall include West and each of its
subsidiaries) agree, except (i) in the case of East as provided in Article 4 of
the East Schedules and in the case of West as provided in Article 4 of the West
Schedules, or (ii) to the extent that the other party shall otherwise consent in
writing, to carry on its business diligently and in accordance with good
commercial practice and to carry on its business in the usual, regular and
ordinary course, in substantially the same manner as heretofore conducted, to
pay its debts and taxes when due subject to good faith disputes over such debts
or taxes, to pay or perform other material obligations when due, and use its
commercially reasonable efforts consistent with past practices and policies to
preserve intact its present business organization, keep available the services
of its present officers and employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others with which
it has business dealings. In furtherance of the foregoing and subject to
applicable law, East and West agree to confer, as promptly as practicable, prior
to taking any material actions or making any material management decisions with
respect to the conduct of business. In addition, except in the case of East as
provided in Article 4 of the East Schedules and in the case of West as provided
in Article 4 of the West Schedules, without the prior written consent of the
other, neither East nor West shall do any of the following, and neither East nor
West shall permit its subsidiaries to do any of the following:
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<PAGE>
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize cash
payments in exchange for any options granted under any of such plans;
(b) Enter into any material partnership arrangements, joint
development agreements or strategic alliances, agreements to create standards or
agreements with "Standards" bodies;
(c) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to the other, or adopt any new
severance plan;
(d) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the East IP Rights or the
West IP Rights, as the case may be, or enter into grants to future patent
rights, other than in the ordinary course of business;
(e) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or split,
combine or reclassify any capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock;
(f) Repurchase or otherwise acquire, directly or indirectly, any
shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan;
(g) Issue, deliver, sell, authorize or propose the issuance, delivery
or sale of, any shares of capital stock or any securities convertible into
shares of capital stock, or subscriptions, rights, warrants or options to
acquire and shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than (i)
the issuance of shares of East Capital Stock or West Common Stock, as the case
may be, pursuant to the exercise of stock options therefor outstanding as of the
date of this Agreement, (ii) options to purchase shares of East Capital Stock or
West Common Stock, as the case may be, to be granted at fair market value in the
ordinary course of business, consistent with past practice and in accordance
with existing stock option plans, (iii) shares of East Capital Stock or West
Common Stock, as the case may be, issuable upon the exercise of the options
referred to in clause (ii), and (iv) shares of East Capital Stock or West Common
Stock, as the case may be, issuable to participants the West Employee Stock
Purchase Plan or the East Employee Stock Purchase Plan consistent with the terms
thereof;
(h) Cause, permit or propose any amendments to any charter document or
Bylaw (or similar governing instruments of any subsidiaries);
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<PAGE>
(i) Except as set forth on the East Schedules or the West Schedules,
as the case may be, acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a material portion of the
assets of, or by any other manner, any business or any corporation, partnership
interest, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of East or West, as the case
may be, or enter into any joint ventures, strategic partnerships or alliances,
other than in the ordinary course of business consistent with past practice;
(j) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of East or West, as the case may be, except in the ordinary course
of business consistent with past practice;
(k) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire debt securities of East or West, as
the case may be, or guarantee any debt securities of others;
(l) Adopt or amend any employee benefit or stock purchase or option
plan, or enter into any employment contract, pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its officers or employees other than in the ordinary course of business,
consistent with past practice;
(m) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business;
(n) Make any grant of exclusive rights to any third party; or
(o) Agree in writing or otherwise to take any of the actions described
in Article 4 (a) through (n) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings. As
-----------------------------------------------------------------
promptly as practicable after the execution of this Agreement, East and West
will prepare, and file with the SEC, the Proxy Statement and West will prepare
and file with the SEC the Registration Statement in which the Proxy Statement
will be included as a prospectus. Each of East and West will respond to any
comments of the SEC, will use its best efforts to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing and will cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable time. As promptly as practicable after
the date of this Agreement, East and West will prepare and file any other
filings required under the Exchange Act, the Securities Act or any other
Federal, foreign or Blue Sky laws relating to the Merger and the transactions
contemplated by this Agreement (the "Other Filings"). Each party will notify the
-------------
other party promptly upon the receipt of any comments from the SEC or its staff
and of any
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<PAGE>
request by the SEC or its staff or any other government officials for amendments
or supplements to the Registration Statement, the Proxy Statement or any Other
Filing or for additional information and will supply the other party with copies
of all correspondence between such party or any of its representatives, on the
one hand, and the SEC, or its staff or any other government officials, on the
other hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any Other Filing. The Proxy Statement, the Registration Statement and
the Other Filings will comply in all material respects with all applicable
requirements of law and the rules and regulations promulgated thereunder.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement, the Registration Statement or any Other
Filing, East or West, as the case may be, will promptly inform the other party
of such occurrence and cooperate in filing with the SEC or its staff or any
other government officials, and/or mailing to stockholders of East and West,
such amendment or supplement. The Proxy Statement will also include the
recommendations of (i) the Board of Directors of East in favor of approval of
this Agreement (except that the Board of Directors of East may withdraw, modify
or refrain from making such recommendation to the extent that the Board
determines that the Board's fiduciary duties under applicable law require it to
do so), and (ii) the Board of Directors of West in favor of the issuance of
shares of West Common Stock in the Merger, the change of West's name and an
increase in the number of shares available for employee stock option grants
(except that the Board of Directors of West may withdraw, modify or refrain from
making such recommendations to the extent that the Board determines that the
Board's fiduciary duties under applicable law require it to do so).
5.2 Meetings of Stockholders. Promptly after the date hereof, East
------------------------
will take all action necessary in accordance with Massachusetts Law and its
Articles of Organization and Bylaws to convene the East Stockholders' Meeting to
be held as promptly as practicable, and in any event within 45 days after the
declaration of effectiveness of the Registration Statement, for the purpose of
voting upon this Agreement. East will consult with West and use its
commercially reasonable efforts to hold the East Stockholders' Meeting on the
same day as the West Stockholders' Meeting. Promptly after the date hereof,
West will take all action necessary in accordance with the Delaware General
Corporation Law and its Certificate of Incorporation and Bylaws to convene the
West Stockholders' Meeting to be held as promptly as practicable, and in any
event within 45 days after the declaration of effectiveness of the Registration
Statement, for the purpose of voting upon the issuance of shares of West Common
Stock by virtue of the Merger. West will consult with East and will use its
commercially reasonable efforts to hold the West Stockholders' Meeting on the
same day as the East Stockholders' Meeting. West and East will each use its
commercially reasonable efforts to solicit from its stockholders proxies in
favor of the approval of this Agreement and the approval of the issuance of
shares of West Common Stock pursuant to the terms of the Merger, as the case may
be, and will take all other action necessary or advisable to secure the vote or
consent of their respective stockholders required by the rules of the National
Association of Securities Dealers, Inc., Massachusetts Law or the Delaware
General Corporation Law, as the case may be, to obtain such approvals, except to
the extent that the Board of Directors of such party determines that doing so
would cause the Board of Directors of such party to breach its fiduciary duties
under applicable law.
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<PAGE>
5.3 Access to Information; Confidentiality.
--------------------------------------
(a) Each party will afford the other party and its accountants,
counsel and other representatives reasonable access during normal business hours
to the properties, books, records and personnel of the other party during the
period prior to the Effective Time to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations and personnel of such party, as the other party may
reasonably request. No information or knowledge obtained in any investigation
pursuant to this Section 5.3 will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
(b) The parties acknowledge that East and West have previously
executed a Confidentiality Agreement, dated May 24, 1996 (the "Confidentiality
---------------
Agreement"), which Confidentiality Agreement will continue in full force and
- ---------
effect in accordance with its terms, except as is necessary to comply with the
terms of this Agreement.
5.4 No Solicitation.
---------------
(a) Restrictions on West.
--------------------
(i) From and after the date of this Agreement until the earlier
of the Effective Time or termination of this Agreement pursuant to its terms,
West and its subsidiaries shall not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or knowingly encourage
submission of, any proposals or offers by any person, entity or group (other
than East and its affiliates, agents and representatives), or (ii) participate
in any discussions or negotiations with, or disclose any non-public information
concerning West or any of its subsidiaries to, or afford any access to the
properties, books or records of West or any of its subsidiaries to, or otherwise
assist or facilitate, or enter into any agreement or understanding with, any
person, entity or group (other than East and its affiliates, agents and
representatives), in connection with any Acquisition Proposal with respect to
West. For the purposes of this Agreement, an "Acquisition Proposal" with
--------------------
respect to an entity means any proposal or offer relating to (i) any merger,
consolidation, sale of substantial assets or similar transactions involving the
entity or any subsidiaries of the entity (other than sales of assets or
inventory in the ordinary course of business or permitted under the terms of
this Agreement), (ii) sale of 10% or more of the outstanding shares of capital
stock of the entity (including without limitation by way of a tender offer or an
exchange offer), (iii) the acquisition by any person of beneficial ownership or
a right to acquire beneficial ownership of, or the formation of any "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) which beneficially owns, or has the right to acquire beneficial
ownership of, 10% or more of the then outstanding shares of capital stock of the
entity (except for acquisitions for passive investment purposes only in
circumstances where the person or group qualifies for and files a Schedule 13G
with respect thereto); or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing. West will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. West will (i) notify East as promptly as practicable if
any inquiry or proposal is made or any information or access is requested in
writing in connection with an Acquisition
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<PAGE>
Proposal or potential Acquisition Proposal and (ii) as promptly as practicable
notify East of the significant terms and conditions of any such Acquisition
Proposal. In addition, subject to the other provisions of this Section 5.4(a),
from and after the date of this Agreement until the earlier of the Effective
Time and termination of this Agreement pursuant to its terms, West and its
subsidiaries will not, and will instruct their respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, make or authorize any public statement, recommendation
or solicitation in support of any Acquisition Proposal made by any person,
entity or group (other than East); provided, however, that nothing herein shall
-------- -------
prohibit West's Board of Directors from taking and disclosing to West's
stockholders a position with respect to a tender offer pursuant to Rules 14d-9
and 14e-2 promulgated under the Exchange Act.
(ii) Notwithstanding the provisions of paragraph (a)(i) above,
prior to the approval of the issuance of the West Common Stock by the
stockholders of West at the West Stockholders' Meeting, West may, to the extent
the Board of Directors of West determines, in good faith, after consultation
with outside legal counsel, that the Board's fiduciary duties under applicable
law require it to do so, participate in discussions or negotiations with, and,
subject to the requirements of paragraph (a)(iii), below, furnish information to
any person, entity or group after such person, entity or group has delivered to
West in writing, an unsolicited bona fide Acquisition Proposal which the Board
of Directors of West in its good faith reasonable judgment determines, after
consultation with its independent financial advisors, would result in a
transaction more favorable to the stockholders of West from a financial point of
view than the Merger and for which financing, to the extent required, is then
committed or which, in the good faith reasonable judgment of the Board of
Directors of West (based upon the advice of independent financial advisors), is
reasonably capable of being financed by such person, entity or group and which
is likely to be consummated (a "West Superior Proposal"). In addition,
----------------------
notwithstanding the provisions of paragraph (a)(i) above, in connection with a
possible Acquisition Proposal, West may refer any third party to this Section
5.4(a) or make a copy of this Section 5.4(a) available to a third party. In the
event West receives a West Superior Proposal, nothing contained in this
Agreement (but subject to the terms hereof) will prevent the Board of Directors
of West from approving such West Superior Proposal or recommending such West
Superior Proposal to West's stockholders, if the Board determines that such
action is required by its fiduciary duties under applicable law; in such case,
the Board of Directors of West may withdraw, modify or refrain from making its
recommendation concerning the approval of the issuance of shares of West Common
Stock by virtue of the Merger; provided, however, that West shall not accept or
-------- -------
recommend to its stockholders, or enter into any agreement concerning, a West
Superior Proposal for a period of not less than 48 hours after East's receipt of
a copy of such West Superior Proposal (or a description of the significant terms
and conditions thereof, if not in writing).
(iii) Notwithstanding anything to the contrary herein, West will
not provide any non-public information to a third party unless: (x) West
provides such non-public information pursuant to a nondisclosure agreement with
terms regarding the protection of confidential information at least as
restrictive as such terms in the Confidentiality Agreement; and (y) such non-
public information is the same information previously delivered to East.
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<PAGE>
(b) Restrictions on East.
--------------------
(i) From and after the date of this Agreement until the earlier
of the Effective Time or termination of this Agreement pursuant to its terms,
East and its subsidiaries will not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or knowingly encourage
submission of, any proposals or offers by any person, entity or group (other
than West and its affiliates, agents and representatives), or (ii) participate
in any discussions or negotiations with, or disclose any non-public information
concerning East or any of its subsidiaries to, or afford any access to the
properties, books or records of East or any of its subsidiaries to, or otherwise
assist or facilitate, or enter into any agreement or understanding with, any
person, entity or group (other than West and its affiliates, agents and
representatives), in connection with any Acquisition Proposal with respect to
East. East will immediately cease any and all existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any of the
foregoing. East will (i) notify West as promptly as practicable if any inquiry
or proposal is made or any information or access is requested in writing in
connection with an Acquisition Proposal or potential Acquisition Proposal and
(ii) as promptly as practicable notify West of the significant terms and
conditions of any such Acquisition Proposal. In addition, subject to the other
provisions of this Section 5.4(b), from and after the date of this Agreement
until the earlier of the Effective Time and termination of this Agreement
pursuant to its terms, East and its subsidiaries will not, and will instruct
their respective directors, officers, employees, representatives, investment
bankers, agents and affiliates not to, directly or indirectly, make or authorize
any public statement, recommendation or solicitation in support of any
Acquisition Proposal made by any person, entity or group (other than West);
provided, however, that nothing herein shall prohibit East's Board of Directors
- -------- -------
from taking and disclosing to East's stockholders a position with respect to a
tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange
Act.
(ii) Notwithstanding the provisions of paragraph (b)(i) above,
prior to the approval of this Agreement by the stockholders of East at the East
Stockholders' Meeting, East may, to the extent the Board of Directors of East
determines, in good faith, after consultation with outside legal counsel, that
the Board's fiduciary duties under applicable law require it to do so,
participate in discussions or negotiations with, and, subject to the
requirements of paragraph (b)(iii), below, furnish information to any person,
entity or group after such person, entity or group has delivered to East in
writing, an unsolicited bona fide Acquisition Proposal which the Board of
Directors of East in its good faith reasonable judgment determines, after
consultation with its independent financial advisors, would result in a
transaction more favorable to the stockholders of East from a financial point of
view than the Merger and for which financing, to the extent required, is then
committed or which, in the good faith reasonable judgment of the Board of
Directors of East (based upon the advice of independent financial advisors), is
reasonably capable of being financed by such person, entity or group and which
is likely to be consummated (an "East Superior Proposal"). In addition,
----------------------
notwithstanding the provisions of paragraph (b)(i) above, in connection with a
possible Acquisition Proposal, East may refer any third party to this Section
5.4(b) or make a copy of this Section 5.4(b) available to a third party. In the
event East receives an East Superior Proposal, nothing contained in this
Agreement (but subject to the terms hereof) will prevent the Board of Directors
of East from approving such East Superior Proposal or recommending such East
Superior Proposal to West's stockholders, if the Board determines that such
action is required by its fiduciary duties under
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applicable law; in such case, the Board of Directors of East may withdraw,
modify or refrain from making its recommendation concerning the approval of this
Agreement; provided, however, that East shall not accept or recommend to its
-------- -------
stockholders, or enter into any agreement concerning, an East Superior Proposal
for a period of not less than 48 hours after West's receipt of a copy of such
East Superior Proposal (or a description of the significant terms and
conditions thereof, if not in writing).
(iii) Notwithstanding anything to the contrary in paragraph (b),
East will not provide any non-public information to a third party unless: (x)
East provides such non-public information pursuant to a nondisclosure agreement
with terms regarding the protection of confidential information at least as
restrictive as such terms in the Confidentiality Agreement; and (y) such non-
public information is the same information previously delivered to West.
5.5 Public Disclosure. West and East will consult with each other
-----------------
before issuing any press release or otherwise making any public statement with
respect to the Merger, this Agreement or an Alternative Proposal and will not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange or the Nasdaq National Market.
5.6 Legal Requirements. Each of West, Merger Sub and East will take
------------------
all reasonable actions necessary or desirable to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals of or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. West will use its commercially
reasonable efforts to take such steps as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable to the
issuance of West Common Stock pursuant hereto. East will use its commercially
reasonable efforts to assist West as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of West Common Stock pursuant hereto.
5.7 Third Party Consents. As soon as practicable following the date
--------------------
hereof, West and East will each use its commercially reasonable efforts to
obtain all material consents, waivers and approvals under any of its or its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
5.8 FIRPTA. At or prior to the Closing, East, if requested by West,
------
shall deliver to the IRS a notice that the East Capital Stock is not a "U.S.
Real Property Interest" as defined and in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2).
5.9 Notification of Certain Matters. West and Merger Sub will give
-------------------------------
prompt notice to East, and East will give prompt notice to West, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement to the Effective Time, or (b) any
material failure of West and Merger
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<PAGE>
Sub or East, as the case may be, or of any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement. Notwithstanding the
above, the delivery of any notice pursuant to this section will not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
5.10 Best Efforts and Further Assurances. Subject to the respective
-----------------------------------
rights and obligations of West and East under this Agreement, each of the
parties to this Agreement will use its best efforts to effectuate the Merger and
the other transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement. Each party hereto, at
the reasonable request of another party hereto, will execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
5.11 Stock Options; Employee Stock Purchase Plan.
-------------------------------------------
(a) At the Effective Time, each outstanding option to purchase shares
of East Capital Stock (each an "East Stock Option") under the East Stock Option
-----------------
Plans, whether or not exercisable, will be assumed by West. Each East Stock
Option so assumed by West under this Agreement will continue to have, and be
subject to, the same terms and conditions set forth in the applicable East Stock
Option Plan immediately prior to the Effective Time (including, without
limitation, any repurchase rights), except that (i) each East Stock Option will
be exercisable (or will become exercisable in accordance with its terms) for
that number of whole shares of West Common Stock equal to the product of the
number of shares of East Capital Stock that were issuable upon exercise of such
East Stock Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of West
Common Stock, and (ii) the per share exercise price for the shares of West
Common Stock issuable upon exercise of such assumed East Stock Option will be
equal to the quotient determined by dividing the exercise price per share of
East Capital Stock at which such East Stock Option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent. After the Effective Time, West will issue to each holder of an
outstanding East Stock Option a notice describing the foregoing assumption of
such East Stock Option by West.
(b) It is the intention of the parties that East Stock Options
assumed by West qualify following the Effective Time as incentive stock options
as defined in Section 422 of the Code to the extent East Stock Options qualified
as incentive stock options immediately prior to the Effective Time; provided,
--------
however, that notwithstanding anything contained in Section 1.6(c) or Section
- -------
5.11 hereof, or any other provision of this Agreement, the exercise price, the
number of shares purchasable and the terms and conditions applicable to any
adjustments to the East Employee Stock Purchase Plan and any employee stock
purchase plan maintained by West shall be determined so as to comply with
Sections 423 and 424 of the Code and the regulations promulgated thereunder
(specifically the provisions of Code Section 424(a) and 424(h)(3)(A) and
Treasury Regulation Section 1.425-1) such that West's assumption of options
granted under the East Employee Stock Purchase Plan by reason of the Merger not
constitute a "modification."
(c) West will reserve sufficient shares of West Common Stock for
issuance under Section 5.11(a) and under Section 1.6(c) hereof.
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<PAGE>
5.12 Form S-8. West agrees to file a registration statement on Form
--------
S-8 for the shares of West Common Stock issuable with respect to assumed East
Stock Options no later than two (2) business days after the Closing Date.
5.13 Indemnification and Insurance.
-----------------------------
(a) From and after the Effective Time, the Surviving Corporation will
fulfill and honor in all respects the obligations of East pursuant to any
indemnification agreements between East and its directors and officers existing
prior to the date hereof. The Articles of Organization and By-laws of the
Surviving Corporation will contain the provisions with respect to
indemnification and elimination of liability for monetary damages set forth in
the Articles of Organization and By-laws of East, which provisions will not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who, at the Effective Time, were directors, officers, employees
or agents of East, unless such modification is required by law.
(b) After the Effective Time the Surviving Corporation will, to the
fullest extent permitted under applicable law or under the Surviving
Corporation's Articles of Organization or By-laws, indemnify and hold harmless,
each present and former director or officer of East or any of its subsidiaries
(collectively, the "Indemnified Parties") against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, to the extent arising out of or pertaining to any action or
omission in his or her capacity as a director or officer of East arising out of
or pertaining to the transactions contemplated by this Agreement for a period of
six years after the date hereof. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) any counsel retained by the Indemnified Parties for any period after
the Effective Time will be reasonably satisfactory to the Surviving Corporation
and West, (ii) after the Effective Time, the Surviving Corporation will pay the
reasonable fees and expenses of such counsel, promptly after statements therefor
are received and (iii) the Surviving Corporation will cooperate in the defense
of any such matter; provided, however, that the Surviving Corporation will not
-------- -------
be liable for any settlement effected without its written consent (which consent
will not be unreasonably withheld); and provided, further, that, in the event
-------- -------
that any claim or claims for indemnification are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim or
claims will continue until the disposition of any and all such claims. The
Indemnified Parties as a group may retain only one law firm (in addition to
local counsel) to represent them with respect to any single action unless there
is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
(c) For a period of six years after the Effective Time, West will
cause the Surviving Corporation to use its commercially reasonable efforts to
maintain in effect, if available, directors' and officers' liability insurance
covering those persons who are currently covered by East's directors' and
officers' liability insurance policy on terms comparable to those applicable to
the then
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current directors and officers of West; provided, however, that in no event will
-------- -------
West or the Surviving Corporation be required to expend in excess of 200% of the
annual premium currently paid by East for such coverage or such coverage as is
available for such 200% of the annual premium.
(d) This Section 5.13 will survive any termination of this Agreement
and the consummation of the Merger at the Effective Time, is intended to benefit
East, the Surviving Corporation and the Indemnified Parties, and will be binding
on all successors and assigns of the Surviving Corporation.
5.14 Tax-Free Reorganization. West and East will each use its
-----------------------
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368 of the Code. West and East
will each make available to the other party and their respective legal counsel
copies of all returns requested by the other party.
5.15 NMS Listing. West agrees to authorize for listing on the Nasdaq
-----------
National Market the shares of West Common Stock issuable, and those required to
be reserved for issuance, in connection with the Merger, upon official notice of
issuance.
5.16 West Affiliate Agreement. Set forth on the West Schedules is a
------------------------
list of those persons who may be deemed to be, in West's reasonable judgment,
affiliates of West within the meaning of Rule 145 promulgated under the
Securities Act (a "West Affiliate"). West will provide East with such
--------------
information and documents as East reasonably requests for purposes of reviewing
such list. West will use its best efforts to deliver or cause to be delivered to
East prior to the Closing Date from each West Affiliate an executed affiliate
agreement in substantially the form attached hereto as Exhibit E, each of which
will be in full force and effect as of the Effective Time.
5.17 East Affiliate Agreement. Set forth on the East Schedules is a
------------------------
list of those persons who may be deemed to be, in East's reasonable judgment,
affiliates of East within the meaning of Rule 145 promulgated under the
Securities Act (an "East Affiliate"). East will provide West with such
--------------
information and documents as West reasonably requests for purposes of reviewing
such list. East will use its best efforts to deliver or cause to be delivered
to West prior to the Closing Date from each East Affiliate an executed affiliate
agreement in substantially the form attached hereto as Exhibit F (the "East
----
Affiliate Agreement"), each of which will be in full force and effect as of the
- -------------------
Effective Time. West will be entitled to place appropriate legends on the
certificates evidencing any West Common Stock to be received by an East
Affiliate pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the West Common Stock,
consistent with the terms of the East Affiliates Agreement.
5.18 Board of Directors of West. The Board of Directors of West will
--------------------------
take all actions necessary to cause the Board of Directors of West, immediately
after the Effective Time, to consist of six persons, three of whom shall have
served on the Board of Directors of West immediately prior to the Effective Time
(one of whom shall be Reed Hastings and two of whom shall be non-employee
directors), and three of whom shall have served on the Board of Directors of
East immediately prior to the Effective Time (one of whom shall be Paul Levine
and two of whom shall be non-employee
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<PAGE>
directors). If, prior to the Effective Time, any of the East or West designees
shall decline or be unable to serve as an East or West director, East (if such
person was designated by East) or West (if such person was designated by West)
shall designate another person to serve in such person's stead, which person
shall be reasonably acceptable to the other party.
5.19 Committees of the Board of Directors of West. The Board of
--------------------------------------------
Directors of West will take all actions necessary to cause the Audit Committee
of the Board of Directors of West, immediately after the Effective Time, to
consist of three members, two of whom shall have served on the Board of
Directors of West immediately prior to the Effective Time and one who shall have
served on the Board of Directors of East immediately prior to the Effective
Time. In addition, the Board of Directors of West will take all actions
necessary to cause the Compensation Committee of the Board of Directors of West,
immediately after the Effective Time, to consist of three members, two of whom
shall have served on the Board of Directors of East immediately prior to the
Effective Time and one who shall have served on the Board of Directors of West
immediately prior to the Effective Time.
5.20 Headquarters of East. Following the Effective Time, East will
--------------------
relocate its headquarters from Lexington, Massachusetts to Sunnyvale,
California.
5.21 Officers of West. At the Effective Time, Reed Hastings will
----------------
become the Chief Executive Officer and President of West, Chuck Bay will become
the Chief Financial Officer of West and Paul Levine will become the Chairman of
the Board of West. All other management positions will essentially remain in
place except for certain reassignments as will be mutually determined.
5.22 Change of Name. Subject to the last sentence of Section 5.1
--------------
hereof, at the West Stockholders' Meeting West shall propose and recommend that
its Certificate of Incorporation be amended at the Effective Time to change its
name to "Pure Atria Corporation."
5.23 Option Plan. Subject to the last sentence of Section 5.1
-----------
hereof, at the West Stockholders' Meeting West shall propose and recommend to
increase the number of shares available for employee stock option grants by a
number of shares equal to five percent (5%) of the total shares of West Common
Stock to be outstanding following the Merger.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger.
------------------------------------------------------------
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
--------------------
adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law by the stockholders of East, and the issuance of shares of
West Common Stock by virtue of the Merger shall have been duly approved by the
requisite vote under the rules of the National Association of Securities
Dealers, Inc. by the stockholders of West.
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<PAGE>
(b) Registration Statement Effective. The SEC shall have declared the
--------------------------------
Registration Statement effective. No stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the Proxy
Statement, shall have been initiated or threatened in writing by the SEC.
(c) No Order. No Governmental Entity shall have enacted, issued,
--------
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(d) Tax Opinions. West and East shall each have received
------------
substantially identical written opinions from their counsel, Wilson, Sonsini,
Goodrich & Rosati, Professional Corporation, and Testa, Hurwitz & Thibeault,
LLP, respectively, in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code. The parties to this Agreement agree to make
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
(e) Nasdaq Listing. The shares of West Common Stock issuable to
--------------
stockholders of East pursuant to this Agreement and such other shares required
to be reserved for issuance in connection with the Merger shall have been
authorized for listing on the Nasdaq National Market upon official notice of
issuance.
(f) Opinion of Accountants. Each of West and East shall have received
----------------------
letters from each of KPMG Peat Marwick LLP and Ernst & Young LLP, each dated
within two (2) business days prior to the Effective Time, regarding those firms'
concurrence with West's managements' and East's managements' conclusions as to
the appropriateness of pooling of interest accounting for the Merger under
Accounting Principles Board Opinion No. 16, if the Merger is consummated in
accordance with this Agreement.
6.2 Additional Conditions to Obligations of East. The obligations of
--------------------------------------------
East to consummate and effect the Merger shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by East:
(a) Representations and Warranties. The representations and
------------------------------
warranties of West and Merger Sub contained in this Agreement shall be true and
correct on and as of the Effective Time, except for changes contemplated by this
Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Effective Time, except, in all such cases where the failure to be so true
and correct, would not have a Material Adverse Effect on West; and East shall
have received a certificate to such effect signed on behalf of West by the
President and the Chief Financial Officer of West;
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<PAGE>
(b) Agreements and Covenants. West and Merger Sub shall have
------------------------
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and East shall have received a certificate to such effect
signed on behalf of West by the President and the Chief Financial Officer of
West;
(c) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to West shall have occurred since the date of this Agreement; and
(d) Legal Opinion. East shall have received a legal opinion from
-------------
Wilson Sonsini Goodrich & Rosati, counsel to West, in a form reasonably
acceptable to East.
6.3 Additional Conditions to the Obligations of West and Merger Sub.
---------------------------------------------------------------
The obligations of West and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
West:
(a) Representations and Warranties. The representations and
------------------------------
warranties of East contained in this Agreement shall be true and correct on and
as of the Effective Time, except for changes contemplated by this Agreement and
except for those representations and warranties which address matters only as of
a particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Effective
Time, except, in all such cases where the failure to be so true and correct,
would not have a Material Adverse Effect on East; and West and Merger Sub shall
have received a certificate to such effect signed on behalf of East by the
President and the Chief Financial Officer of East;
(b) Agreements and Covenants. East shall have performed or complied
------------------------
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and the West shall have received a certificate to such effect signed on
behalf of East by the President and the Chief Financial Officer of East;
(c) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to East shall have occurred since the date of this Agreement; and
(d) Legal Opinion. West shall have received a legal opinion from
-------------
Testa, Hurwitz & Thibeault, LLP, counsel to East, in a form reasonably
acceptable to West.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time of the Merger, whether before or after approval of the
Merger by the stockholders of West and East:
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<PAGE>
(a) by mutual written consent duly authorized by the Boards of
Directors of West and East;
(b) by either East or West if the Merger shall not have been
consummated by December 31, 1996; provided, however, that the right to terminate
-------- -------
this Agreement under this Section 7.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement;
(c) by either East or West if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (an "Order"), in any
-----
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
(d) by either East or West if the required approvals of the
stockholders of East or West contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote upon a vote taken
at a meeting of stockholders duly convened therefor or at any adjournment
thereof (provided that the right to terminate this Agreement under this Section
--------
7.1(d) shall not be available to any party where the failure to obtain
stockholder approval of such party shall have been caused by the action or
failure to act of such party in breach of this Agreement);
(e) by either East or West, if East shall have accepted an East
Superior Proposal or if the East Board of Directors recommends an East Superior
Proposal to the stockholders of East;
(f) by West, if the Board of Directors of East shall have withheld,
withdrawn or modified in a manner adverse to West its recommendation in favor of
approving the issuance of the shares of West Common Stock by virtue of the
Merger;
(g) by either East or West, if West shall have accepted a West
Superior Proposal or if the West Board of Directors recommends a West Superior
Proposal to the stockholders of West;
(h) by East, if the Board of Directors of West shall have withheld,
withdrawn or modified in a manner adverse to East its recommendation in favor of
the Merger;
(i) by East, upon a breach of any representation, warranty, covenant
or agreement on the part of West set forth in this Agreement, or if any
representation or warranty of West shall have become untrue, in either case such
that the conditions set forth in Section 6.2(a) or Section 6.2(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided that if such inaccuracy in West's
--------
representations and warranties or breach by West is curable by West through the
exercise of its commercially reasonable efforts within five (5) days of the time
such representation or warranty shall have become untrue or such breach, then
East may not terminate this Agreement under this Section 7.1(i) during such
five-day period provided West continues to exercise such commercially reasonable
efforts;
-39-
<PAGE>
(j) by West, upon a breach of any representation, warranty, covenant
or agreement on the part of East set forth in this Agreement, or if any
representation or warranty of East shall have become untrue, in either case such
that the conditions set forth in Section 6.3(a) or Section 6.3(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided, that if such inaccuracy in the
--------
Company's representations and warranties or breach by East is curable by East
through the exercise of its commercially reasonable efforts within five (5) days
of the time such representation or warranty shall have become untrue or such
breach, then West may not terminate this Agreement under this Section 7.1(j)
during such five-day period provided East continues to exercise such
commercially reasonable efforts;
(k) by East, if there shall have occurred any Material Adverse Effect
with respect to West since the date of this Agreement;
(l) by West, if there shall have occurred any Material Adverse Effect
with respect to East since the date of this Agreement; or
(m) by either East or West if the earnings per share reported by the
other party for the fiscal quarter ending June 30, 1996 are below the average of
earnings per share estimates published by securities analysts as of the date of
this Agreement, if such shortfall is material in the opinion of the terminating
party determined in its sole good faith judgment; provided, that the right to
terminate the Agreement under this Section 7.1(m) shall be null and void if not
exercised within 5 days following such report of earnings.
7.2 Notice of Termination; Effect of Termination.
--------------------------------------------
(a) Subject to Sections 7.2(b) and (c), any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8 (miscellaneous), each of which
shall survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
(b) Any termination of this Agreement by East pursuant to Sections
7.1(d) or 7.1(e) hereof shall be of no force or effect unless prior to such
termination East shall have paid to West any amounts payable pursuant to Section
7.3(b).
(c) Any termination of this Agreement by West pursuant to Sections
7.1(d) or 7.1(g) hereof shall be of no force or effect unless prior to such
termination West shall have paid to East any amounts payable pursuant to Section
7.3(c).
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<PAGE>
7.3 Fees and Expenses.
-----------------
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated; provided, however, that West and East shall share equally
-------- -------
all fees and expenses, other than attorneys' and accountants fees and expenses,
incurred in relation to the printing and filing of the Proxy Statement
(including any preliminary materials related thereto) and the Registration
Statement (including financial statements and exhibits) and any amendments or
supplements thereto.
(b) East shall immediately make payment to West (by wire transfer or
cashiers check) of (x) $25,000,000 (i) in the event East shall have accepted an
East Superior Proposal or if the East Board of Directors recommends an East
Superior Proposal to the stockholders of East, or (ii) in the event the vote of
the stockholders of East contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote upon a vote taken
at a meeting of stockholders duly convened therefor or at any adjournment
thereof (an "East Negative Vote") if prior to such East Negative Vote there
------------------
shall have occurred an Acquisition Proposal with respect to East which shall
have been publicly disclosed and not withdrawn; or (y) $15,000,000 in the event
of an East Negative Vote if (i) prior to such East Negative Vote the Board of
Directors of East shall have withheld, withdrawn or modified in a manner adverse
to West its recommendation in favor of the Merger and (ii) East shall not be
required to make payment of the $25,000,000 required by clause (x) above; or (z)
$5,000,000 in the event of an East Negative Vote if East shall not be required
to make payment of the $25,000,000 required by clause (x) above and if East
shall not be required to make payment of the $15,000,000 required by clause (y)
above.
(c) West shall immediately make payment to East (by wire transfer or
cashiers check) of (x) $25,000,000 (i) in the event West shall have accepted an
West Superior Proposal or if the West Board of Directors recommends an West
Superior Proposal to the stockholders of West, or (ii) in the event the vote of
the stockholders of West contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote upon a vote taken
at a meeting of stockholders duly convened therefor or at any adjournment
thereof (an "West Negative Vote") if prior to such West Negative Vote there
------------------
shall have occurred an Acquisition Proposal with respect to West which shall
have been publicly disclosed and not withdrawn; or (y) $15,000,000 in the event
of an West Negative Vote if (i) prior to such West Negative Vote the Board of
Directors of West shall have withheld, withdrawn or modified in a manner adverse
to East its recommendation in favor of the Merger and (ii) West shall not be
required to make payment of the $25,000,000 required by clause (x) above; or (z)
$5,000,000 in the event of an West Negative Vote if West shall not be required
to make payment of the $25,000,000 required by clause (x) above and if West
shall not be required to make payment of the $15,000,000 required by clause (y)
above.
(d) Payment of the fees described in Section 7.3(b) and (c) above
shall not be in lieu of damages incurred in the event of breach of this
Agreement.
7.4 Amendment. Subject to applicable law, this Agreement may be
---------
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
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<PAGE>
7.5 Extension; Waiver. At any time prior to the Effective Time any
-----------------
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
----------------------------------------------
and warranties of East, West and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to West or Merger Sub, to:
Pure Software Inc.
1309 South Mary Avenue
Sunnyvale, California 94087
Attention: President
Telephone No.: (408) 720-1600
Telecopy No.: (408) 720-9200
with a copy at the same address to the
attention of the General Counsel, and
with a copy to:
Wilson, Sonsini, Goodrich &
Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
Telephone No.: (415) 493-9300
Telecopy No.: (415) 493-6811
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<PAGE>
(b) if to East, to:
Atria Software, Inc.
20 Maguire Road
Lexington, Massachusetts 02173
Attention: President
Telephone No.: (617) 676-2400
Telecopy No.: (617) 676-2410
with a copy at the same address to the
attention of the General Counsel, and
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower, 125 High Street
Boston, Massachusetts 02110
Attention: Mark J. Macenka, Esq.
Telephone No.: (617) 248-7000
Telecopy No.: (617) 248-7100
8.3 Interpretation; Knowledge.
-------------------------
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
------- -------- ---------
in each case to be followed by the words "without limitation." The table of
------------------
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "the business of" an entity, such
---------------
reference shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity shall
be deemed to include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "knowledge" means, with
respect to any matter in question, that the executive officers of East or West,
as the case may be, have actual knowledge of such matter.
8.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement. This Agreement and the documents and
----------------
instruments and other agreements among the parties hereto as contemplated by or
referred to herein, including East Schedules and the West Schedules (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
it being understood that the
-43-
<PAGE>
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as set forth herein.
8.6 Severability. In the event that any provision of this Agreement
------------
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise
------------------------------------
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.8 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction of any state or federal court within the State of Delaware, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have
---------------------
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
8.10 Assignment. No party may assign either this Agreement or any of
----------
its rights, interests, or obligations hereunder without the prior written
approval of the of the parties.
-44-
<PAGE>
IN WITNESS WHEREOF, West, Merger Sub, and East have caused this Agreement
to be signed by themselves or their duly authorized respective officers, all as
of the date first written above.
PURE SOFTWARE INC.
By:______________________________________
Reed Hastings,
President and Chief Executive Officer
ATRIA SOFTWARE, INC.
By:______________________________________
Paul H. Levine,
President and Chief Executive Officer
CST ACQUISITION CORPORATION
By:______________________________________
Reed Hastings, Chief Executive Officer
**** REORGANIZATION AGREEMENT ****
-45-
<PAGE>
EXHIBIT 2
-1-
PARTICIPATION AGREEMENT
This Participation Agreement dated as of June 6, 1996 (the "Agreement") by
---------
and among Pure Software Inc., a Delaware corporation ("Pure"), CST Acquisition
----
Corporation, a Massachusetts corporation and a wholly-owned subsidiary of Pure
(the "Merger Sub"), and the stockholders who are signatories hereto (the "Major
---------- -----
Stockholders") of Atria Software, Inc., a Massachusetts corporation ("Atria").
- ------------
Capitalized terms not defined herein have the meanings assigned to them in the
Agreement and Plan of Reorganization (the "Merger Agreement") dated the date
hereof by and among Pure, the Merger Sub and Atria.
WITNESSETH:
WHEREAS, pursuant to the Merger Agreement, Pure, the Merger Sub and Atria
have agreed to merge (the "Merger") the Merger Sub with and into Atria on the
terms and conditions set forth therein; and
WHEREAS, to induce Pure to enter into the Merger Agreement, each of the
Major Stockholders, as principal stockholders of Atria, has agreed to enter into
this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
COVENANTS
1.1 Covenants and Agreements. Each of the Major Stockholders hereby
------------------------
covenants and agrees with Pure and the Merger Sub as follows:
1.1(a) Cooperation. It shall cooperate fully with Atria, Pure and
-----------
the Merger Sub in furnishing any information or performing any action reasonably
requested by any such party, which information or action is necessary or
appropriate for the speedy and successful consummation of the transactions
contemplated by the Merger Agreement or is necessary or appropriate for the
corporate purposes of Pure. It shall use all reasonable efforts to cause the
Closing to occur at the earliest practical time.
1.1(b) Other Required Information. It shall furnish to Atria, Pure
--------------------------
and the Merger Sub all information concerning itself and its subsidiaries and
affiliates, if applicable, as is required to be set forth in any application or
statement to be filed with
<PAGE>
-2-
any Governmental Entity in connection with the transactions contemplated by the
Merger Agreement or otherwise.
1.1(c) Publicity. Except as otherwise required by applicable law or
---------
stock exchange or securities market regulations, it shall not issue any press
release or make any other public statement without obtaining the prior approval
of Pure to the contents and the manner of presentation and publication thereof.
1.1(d) Restriction on Sales of Atria Common Stock and Pure Common
-----------------------------------------------------------
Stock. It agrees to comply with the restrictions on transfer of shares of Atria
- -----
Common Stock or Pure Common Stock set forth in that certain Affiliate Agreement
of even date herewith.
1.1(e) Other Negotiations. It agrees to fully comply with the
------------------
provisions of Section 5.4 of the Merger Agreement.
1.1(f) Agreement to Vote Shares. At every meeting of the
------------------------
stockholders of Atria held on or prior to the Expiration Date, and at every
adjournment thereof, and on every action or approval by written consent of the
stockholders of Atria, it shall vote all shares of Atria capital stock owned by
it: (i) in favor of approval and adoption of the Merger Agreement and the
Merger and any matter that could reasonably be expected to facilitate the Merger
and (ii) against approval of any proposal made in opposition to or competition
with consummation of the Merger (an "Opposing Proposal").
-----------------
1.1(g) Agreement to Grant Proxy. It shall execute and deliver to
------------------------
Pure within five days of Pure's written request therefor a valid and binding
irrevocable proxy in any form reasonably proposed by Pure granting Pure (or its
designees) the authority to vote its shares of capital stock of Atria in
accordance with and subject to the limitations of Section 1.1(f).
1.1(h) No Proxy Solicitations. Except as required by law, including
----------------------
actions which it determines upon the written advice of legal counsel are
required pursuant to its fiduciary duties as a Director (as defined below) under
applicable law, it shall not, and will not permit any person under its control
to: (i) solicit proxies or become a "participant" in a "solicitation" (as such
terms are defined in Regulation 14A under the Exchange Act) with respect to an
Opposing Proposal; or (ii) initiate a stockholders' vote or action by consent of
Atria stockholders with respect to an Opposing Proposal.
1.1(i) Obligations as Director and/or Officer. If at any time prior
--------------------------------------
to the expiration of this Agreement a representative of the Major Stockholder is
a member of the Board of Directors of Atria ("Director") or an officer of Atria,
nothing in this Agreement
<PAGE>
-3-
shall limit or restrict the Director or officer in acting in his capacity as a
Director or officer, as the case may be, of Atria and exercising his fiduciary
duties and responsibilities, it being agreed and understood that this Agreement
shall apply to the Major Stockholder solely in its capacity as a shareholder and
shall not apply to the Director's or officer's actions, judgments or decisions
as a Director or officer of Atria.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Major Stockholders. Each of the
----------------------------------------------------
Major Stockholders hereby represents and warrants to Pure and the Merger Sub as
follows:
2.1(a) Existence and Power. If the Major Stockholder is a
-------------------
corporation, partnership or trust, it is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization.
2.1(b) Authorization; Binding Agreement. The execution, delivery and
--------------------------------
performance by the Major Stockholder, if it is a corporation, partnership or
trust, of this Agreement are within its corporate, partnership or trust power
and authority and have been duly authorized by all necessary corporate,
partnership or trust action on the part of the Major Stockholder. This
Agreement has been duly executed and delivered by the Major Stockholder and
constitutes a valid and binding agreement of the Major Stockholder, enforceable
against the Major Stockholder in accordance with its terms.
2.1(c) Governmental Authorization. The execution, delivery and
--------------------------
performance by it of this Agreement does not require any action by or in respect
of, or declaration, filing or registration with, any Governmental Entity.
2.1(d) Non-Contravention. The execution, delivery and performance by
-----------------
it of this Agreement does not and will not (i) if it is a corporation,
partnership or trust, contravene or conflict with its organizational documents,
or (ii) contravene or conflict with or constitute a violation of any provision
of any law, regulation, judgment, injunction, order or decree binding upon or
applicable to it.
2.1(e) Litigation. There is no action, suit, investigation or
----------
proceeding (or any basis therefor) pending against or, to the knowledge of the
Major Stockholder, threatened against or affecting, the Major Stockholder or any
of its respective properties before any court or arbitrator or any governmental
body, agency, official or authority that in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement or the Merger Agreement.
<PAGE>
-4-
2.1(f) Finders' Fees. There is no investment banker, broker, finder
-------------
or other intermediary that has been retained by or is authorized to act on
behalf of the Major Stockholder who might be entitled to any fee or commission
from Pure, Atria or any of their affiliates upon consummation of the
transactions contemplated by this Agreement or the Merger Agreement.
2.1(g) Ownership of Stock. The Major Stockholder is the record and
------------------
beneficial owner of the shares of Atria Common Stock set forth in the Affiliate
Agreement, and owns all such shares free and clear of any and all liens,
pledges, charges, security interests, restrictions or encumbrances of any kind
or any rights of first refusal (other than in favor of Atria), voting trusts,
proxies or other arrangements or understandings, whether written or oral, and
the Major Stockholder has the sole and exclusive right and power to exercise all
voting rights and other rights with respect to such shares.
2.1(h) Certain Tax Matters. The Major Stockholder has no plan or
-------------------
intention to engage in a direct or indirect sale, exchange, redemption,
disposition or conveyance or any transaction that would have the effect of
reducing in any way the Major Stockholder's risk of ownership, including, but
not limited to, distributions by a partnership to its partners and by a
corporation to its stockholders, of the shares of Pure Common Stock to be
received by the Major Stockholder in the Merger. The Major Stockholder
acknowledges that it is giving this representation and covenant to enable Testa,
Hurwitz & Thibeault, LLP and Wilson, Sonsini, Goodrich & Rosati to opine that
the Merger constitutes a reorganization within the meaning of Section 368 of the
Code and further recognizes that significant adverse tax consequences might
result if such representation is not true. The Major Stockholder understands
and agrees that, in connection with the Merger, the Major Stockholder will be
required to restate the foregoing representation on or about the Effective Time
of the Merger.
ARTICLE III
MISCELLANEOUS
3.1 Survival; Termination. (a) All representations and warranties in this
---------------------
Agreement shall survive the Closing. Any investigation or other examination
that may have been made or may be made at any time by or on behalf of the party
to whom representations and warranties are made shall not limit, diminish or in
any way affect the representations and warranties in this Agreement, and the
parties may rely on the representations and warranties in this Agreement
irrespective of any information obtained by them by any investigation,
examination or otherwise.
<PAGE>
-5-
(b) The covenants contained in Sections 1.1(a), 1.1(b), 1.1(e),
1.1(f), 1.1(g), 1.1(h) and 1.1(i) (but not any liability for any breach
thereof) shall terminate at the Effective Time. All other covenants contained
in this Agreement shall survive the Merger.
(c) This Agreement shall terminate in all respects upon termination of
the Merger Agreement (but not any liability for any breach hereof).
3.2 Specific Performance. Each of the parties to this Agreement hereby
--------------------
acknowledges that the other party will have no adequate remedy at law if it
fails to perform any of its obligations under this Agreement. In such event,
each of the parties agrees that the other party shall have the right, in
addition to any other rights it may have (whether at law or in equity), to
specific performance of this Agreement.
3.3 Further Assurances. If at any time after the Effective Time, Pure or
------------------
the Merger Sub shall consider it advisable that any further conveyance,
agreements, documents, instruments and assurances of law or any other things are
necessary or desirable to vest, perfect, confirm or record in the Merger Sub the
title to any property, rights, privileges, powers and franchises of Atria, the
officers of Atria last in office and such other persons, if any, as the Board of
Directors of Atria last in office may authorize shall execute and deliver, upon
Pure or the Merger Sub's request, any and all proper conveyances, agreements,
documents, instruments and assurances of law, and do all things necessary or
proper to vest, perfect, confirm or record title to such property, rights,
privileges, powers and franchises in the Merger Sub, and otherwise to carry out
the provisions of this Agreement.
3.4 Parties in Interest. All the terms and provisions of this Agreement
-------------------
shall be binding upon, shall inure to the benefit of and shall be enforceable by
the respective successors and permitted assigns of the parties hereto. Nothing
expressed or implied in this Agreement is intended or shall be construed to
confer upon or give any person, firm or corporation other than the parties
hereto, their permitted successors or assigns, and their respective stockholders
any rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
3.5 Entire Agreement. This Agreement and the Merger Agreement (together
----------------
with the Exhibits, the Pure Disclosure Schedule, the Atria Disclosure Schedule
and the other documents delivered pursuant thereto) constitute the entire
agreement between the parties and supersede all prior agreements and
understandings, both written and oral, between the parties, or any of them, with
respect to the subject matter hereof.
3.6 Amendment or Modification. At any time before or after the adoption
-------------------------
of the Agreement by the stockholders of Atria or the approval of the proposals
contained in
<PAGE>
-6-
the Proxy Statement by the stockholders of Pure and Atria, this Agreement may be
amended or supplemented by additional agreements, articles or certificates, in
writing, as may be determined by the parties hereto to be necessary, desirable
or expedient to further the purposes of this Agreement, or to clarify the
intention of the parties hereto, or to add to or to modify the covenants, terms
or conditions hereof or to effect or facilitate any governmental approval or
acceptance of the Merger or of this Agreement or to effect or facilitate the
filing or recording of the Agreement or the consummation of any of the
transactions contemplated hereby or thereby.
3.7 No Waiver. The failure of any party hereto to enforce at any time any
---------
of the provisions of this Agreement shall in no way be construed to be a waiver
of any such provision, nor in any way to affect the validity of this Agreement
or any part hereof or the right of such party thereafter to enforce each and
every such provision. No waiver of any breach of or non-compliance with this
Agreement shall be held to be a waiver of any other or subsequent breach or non-
compliance.
3.8 Assignability. This Agreement shall not be assignable by the Major
-------------
Stockholder, on the one hand, or Pure or the Merger Sub, on the other hand,
without the prior written consent of Pure or the Merger Sub, on the one hand, or
the Major Stockholder, on the other hand.
3.9 Headings and Interpretation. The headings contained in this Agreement
---------------------------
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Terms such as "herein", "hereof",
"hereinafter" refer to this Agreement as a whole and not to the particular
sentence or paragraph where they appear, unless the context otherwise requires.
Unless the context otherwise requires, (i) terms used in the plural include the
singular, and vice versa, and (ii) words in the masculine gender include the
feminine, and vice versa.
3.10 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when received at the addresses set forth in the Merger
Agreement, in the case of Pure, the Merger Sub, and the books and records of
Atria, in the case of the Major Stockholder, or to such other address as any
party may have furnished to the others in writing in accordance herewith, except
that notices of change of address shall only be effective upon receipt.
3.11 Law Governing. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
<PAGE>
-7-
3.12 Invalidity of Provisions. Each of the provisions contained in this
------------------------
Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other
provision hereof.
3.13 Counterparts. This Agreement may be executed simultaneously in one or
------------
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
[Remainder of page intentionally left blank]
<PAGE>
-8-
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties on the date first above written.
PURE SOFTWARE INC.
By:___________________________
Name:
Title:
CST ACQUISITION CORPORATION
By:___________________________
Name:
Title:
MAJOR STOCKHOLDERS
(print name of stockholder above)
By:____________________________
Name:
Title:
(if applicable)
<PAGE>
EXHIBIT 3
PARTICIPATION AGREEMENT
This Participation Agreement dated as of June 6, 1996 (the "Agreement") by
---------
and among Atria Software, Inc., a Massachusetts corporation ("Atria") and the
-----
stockholders of who are signatories hereto (the "Major Stockholder") of Pure
-----------------
Software Inc., a Delaware corporation ("Pure"). Capitalized terms not defined
herein have the meanings assigned to them in the Agreement and Plan of
Reorganization (the "Merger Agreement") dated the date hereof by and among Pure
and CST Acquisition Corporation, a Massachusetts corporation and a wholly-owned
subsidiary of Pure (the "Merger Sub"), and Atria.
----------
WITNESSETH:
WHEREAS, pursuant to the Merger Agreement, Pure, the Merger Sub and Atria
have agreed to merge (the "Merger") the Merger Sub with and into Atria on the
terms and conditions set forth therein; and
WHEREAS, to induce Atria to enter into the Merger Agreement, each of the
Major Stockholders, as principal stockholders of Pure, has agreed to enter into
this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
COVENANTS
1.1 Covenants and Agreements. Each of the Major Stockholders hereby
------------------------
covenants and agrees with Atria as follows:
1.1(a) Cooperation. It shall cooperate fully with Atria, Pure and
-----------
the Merger Sub in furnishing any information or performing any action reasonably
requested by any such party, which information or action is necessary or
appropriate for the speedy and successful consummation of the transactions
contemplated by the Merger Agreement or is necessary or appropriate for the
corporate purposes of Atria. It shall use all reasonable efforts to cause the
Closing to occur at the earliest practical time.
1.1(b) Other Required Information. It shall furnish to Atria, Pure
--------------------------
and the Merger Sub all information concerning itself and its subsidiaries and
affiliates, if applicable, as is required to be set forth in any application or
statement to be filed with any Governmental Entity in connection with the
transactions contemplated by the Merger Agreement or otherwise.
<PAGE>
1.1(c) Publicity. Except as otherwise required by applicable law or
---------
stock exchange or securities market regulations, it shall not issue any press
release or make any other public statement without obtaining the prior approval
of Atria to the contents and the manner of presentation and publication thereof.
1.1(d) Restriction on Sales of Pure Common Stock. It agrees to
-----------------------------------------
comply with the restrictions on transfer of shares of Pure Common Stock set
forth in that certain Affiliate Agreement of even date herewith.
1.1(e) Other Negotiations. It agrees to fully comply with the
------------------
provisions of Section 5.4 of the Merger Agreement.
1.1(f) Agreement to Vote Shares. At every meeting of the
------------------------
stockholders of Pure held on or prior to the Expiration Date, and at every
adjournment thereof, and on every action or approval by written consent of the
stockholders of Pure, it shall vote all shares of Pure capital stock owned by
it: (i) in favor of approval and adoption of the Merger Agreement and the
Merger and any matter that could reasonably be expected to facilitate the Merger
and (ii) against approval of any proposal made in opposition to or competition
with consummation of the Merger (an "Opposing Proposal"). "Expiration Date"
----------------- ---------------
shall mean the earlier of (i) such time as the Merger shall become effective in
accordance with the terms and provisions of the Merger Agreement and (ii) such
time as the Merger Agreement shall have been terminated pursuant to Article VII
thereof.
1.1(g) Agreement to Grant Proxy. It shall execute and deliver to
------------------------
Atria within five days of Atria's written request therefor a valid and binding
irrevocable proxy in any form reasonably proposed by Atria granting Atria (or
its designees) the authority to vote its shares of capital stock of Pure in
accordance with and subject to the limitation of Section 1.1(f)Atria.
1.1(h) No Proxy Solicitations. Except as required by law, including
----------------------
actions which it determines upon the written advice of legal counsel are
required pursuant to its fiduciary duties as a Director (as defined below) under
applicable law, it shall not, and will not permit any person under its control
to: (i) solicit proxies or become a "participant" in a "solicitation" (as such
terms are defined in Regulation 14A under the Exchange Act) with respect to an
Opposing Proposal; or (ii) initiate a stockholders' vote or action by consent of
Pure stockholders with respect to an Opposing Proposal.
1.1(i) Obligations as Director and/or Officer. If at any time prior
--------------------------------------
to the expiration of this Agreement a representative of a Major Stockholder is a
member of the Board of Directors of Pure ("Director") or an officer of Pure,
nothing in this Agreement shall limit or restrict the Director or officer in
acting in his capacity as a director or officer, as the case may be, of Pure and
exercising his fiduciary duties and responsibilities, it being agreed and
understood that this Agreement shall apply to the Major Stockholder solely in
<PAGE>
its capacity as a shareholder and shall not apply to the Director's or officer's
actions, judgments or decisions as a director or officer of Pure.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Major Stockholders. Each of the
----------------------------------------------------
Major Stockholders hereby represents and warrants to Atria as follows:
2.1(a) Existence and Power. If the Major Stockholder is a
-------------------
corporation, partnership or trust, it is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization.
2.1(b) Authorization; Binding Agreement. The execution, delivery and
--------------------------------
performance by the Major Stockholder, if it is a corporation, partnership or
trust, of this Agreement are within its corporate, partnership or trust power
and authority and have been duly authorized by all necessary corporate,
partnership or trust action on the part of the Major Stockholder. This
Agreement has been duly executed and delivered by the Major Stockholder and
constitutes a valid and binding agreement of the Major Stockholder, enforceable
against the Major Stockholder in accordance with its terms.
2.1(c) Governmental Authorization. The execution, delivery and
--------------------------
performance by it of this Agreement does not require any action by or in respect
of, or declaration, filing or registration with, any Governmental Entity.
2.1(d) Non-Contravention. The execution, delivery and performance by
-----------------
it of this Agreement does not and will not (i) if it is a corporation,
partnership or trust, contravene or conflict with its organizational documents,
or (ii) contravene or conflict with or constitute a violation of any provision
of any law, regulation, judgment, injunction, order or decree binding upon or
applicable to it.
2.1(e) Litigation. There is no action, suit, investigation or
----------
proceeding (or any basis therefor) pending against or, to the knowledge of the
Major Stockholder, threatened against or affecting, the Major Stockholder or any
of its respective properties before any court or arbitrator or any governmental
body, agency, official or authority that in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement or the Merger Agreement.
2.1(f) Finders' Fees. There is no investment banker, broker, finder
-------------
or other intermediary that has been retained by or is authorized to act on
behalf of the Major Stockholder who might be entitled to any fee or commission
from Pure, Atria or any of their affiliates upon consummation of the
transactions contemplated by this Agreement or the Merger Agreement.
<PAGE>
2.1(g) Ownership of Stock. The Major Stockholder is the record and
------------------
beneficial owner of the shares of Pure Common Stock set forth in the Affiliate
Agreement, and owns all such shares free and clear of any and all liens,
pledges, charges, security interests, restrictions or encumbrances of any kind
or any rights of first refusal (other than in favor of Pure), voting trusts,
proxies or other arrangements or understandings, whether written or oral, and
Major Stockholder has the sole and exclusive right and power to exercise all
voting rights and other rights with respect to such shares.
ARTICLE III
MISCELLANEOUS
3.1 Survival; Termination. (a) All representations and warranties in this
---------------------
Agreement shall survive the Closing. Any investigation or other examination
that may have been made or may be made at any time by or on behalf of the party
to whom representations and warranties are made shall not limit, diminish or in
any way affect the representations and warranties in this Agreement, and the
parties may rely on the representations and warranties in this Agreement
irrespective of any information obtained by them by any investigation,
examination or otherwise.
(b) The covenants contained in Sections 1.1(a), 1.1(b), 1.1(e),
1.1(f), 1.1(g), 1.1(h) and 1.1(i) (but not any liability for any breach thereof)
shall terminate at the Effective Time. All other covenants contained in this
Agreement shall survive the Merger.
(c) This Agreement shall terminate in all respects upon termination of
the Merger Agreement (but not any liability for any breach hereof).
3.2 Specific Performance. Each of the parties to this Agreement hereby
--------------------
acknowledges that the other party will have no adequate remedy at law if it
fails to perform any of its obligations under this Agreement. In such event,
each of the parties agrees that the other party shall have the right, in
addition to any other rights it may have (whether at law or in equity), to
specific performance of this Agreement.
3.3 Parties in Interest. All the terms and provisions of this Agreement
-------------------
shall be binding upon, shall inure to the benefit of and shall be enforceable by
the respective successors and permitted assigns of the parties hereto. Nothing
expressed or implied in this Agreement is intended or shall be construed to
confer upon or give any person, firm or corporation other than the parties
hereto, their permitted successors or assigns, and their respective stockholders
any rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
3.4 Entire Agreement. This Agreement and the Merger Agreement (together
----------------
with the Exhibits, the Pure Disclosure Schedule, the Atria Disclosure Schedule
and the
<PAGE>
other documents delivered pursuant thereto) constitute the entire agreement
between the parties and supersede all prior agreements and understandings, both
written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
3.5 Amendment or Modification. At any time before or after the adoption
-------------------------
of the Agreement by the stockholders of Atria or the approval of the proposals
contained in the Proxy Statement by the stockholders of Pure and Atria, this
Agreement may be amended or supplemented by additional agreements, articles or
certificates, in writing, as may be determined by the parties hereto to be
necessary, desirable or expedient to further the purposes of this Agreement, or
to clarify the intention of the parties hereto, or to add to or to modify the
covenants, terms or conditions hereof or to effect or facilitate any
governmental approval or acceptance of the Merger or of this Agreement or to
effect or facilitate the filing or recording of the Agreement or the
consummation of any of the transactions contemplated hereby or thereby.
3.6 No Waiver. The failure of any party hereto to enforce at any time any
---------
of the provisions of this Agreement shall in no way be construed to be a waiver
of any such provision, nor in any way to affect the validity of this Agreement
or any part hereof or the right of such party thereafter to enforce each and
every such provision. No waiver of any breach of or non-compliance with this
Agreement shall be held to be a waiver of any other or subsequent breach or non-
compliance.
3.7 Assignability. This Agreement shall not be assignable by Atria, on
-------------
the one hand, or the Major Stockholder, on the other hand, without the prior
written consent of the Major Stockholder, on the one hand, or Atria, on the
other hand.
3.8 Headings and Interpretation. The headings contained in this Agreement
---------------------------
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Terms such as "herein", "hereof",
"hereinafter" refer to this Agreement as a whole and not to the particular
sentence or paragraph where they appear, unless the context otherwise requires.
Unless the context otherwise requires, (i) terms used in the plural include the
singular, and vice versa, and (ii) words in the masculine gender include the
feminine, and vice versa.
3.9 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when received at the addresses set forth in the Merger
Agreement, in the case of Atria, and the books and records of Pure, in the case
of the Major Stockholders, or to such other address as any party may have
furnished to the others in writing in accordance herewith, except that notices
of change of address shall only be effective upon receipt.
3.10 Law Governing. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
<PAGE>
3.11 Invalidity of Provisions. Each of the provisions contained in this
------------------------
Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other
provision hereof.
3.12 Counterparts. This Agreement may be executed simultaneously in one or
------------
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties on the date first above written.
ATRIA SOFTWARE, INC.
By:________________________________
Name:
Title:
MAJOR STOCKHOLDERS
(print name of stockholder above)
By:_________________________________
Name:
Title:
(if applicable)
<PAGE>
EXHIBIT 4
[Option from East to West]
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT dated as of June 6, 1996 (the "Agreement") is
---------
entered into by and between Pure Software Inc., a Delaware corporation ("West"),
----
and Atria Software, Inc., a Massachusetts corporation ("East").
----
RECITALS
--------
WHEREAS, concurrently with the execution and delivery of this Agreement,
West, East and CST Acquisition Corporation, a Massachusetts corporation and a
wholly owned subsidiary of West ("Sub"), are entering into an Agreement and Plan
---
of Reorganization (the "Merger Agreement"), which provides that, among other
----------------
things, upon the terms and subject to the conditions thereof, Sub will be merged
with and into East (the "Merger") with East continuing as the surviving
------
corporation and as a wholly owned subsidiary of West; and
WHEREAS, as a condition to West's and Sub's willingness to enter into the
Merger Agreement, West has requested that East agree, and East has so agreed, to
grant to West an option to acquire shares of East's Common Stock upon the terms
and subject to the conditions set forth herein;
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option
---------------
East hereby grants to West an irrevocable option (the "Option") to acquire
------
up to 2,149,038 shares (the "Option Shares") of the Common Stock, par value $.01
-------------
per share, of East ("East Shares") in the manner set forth below (i) by
-----------
exchanging therefor shares of the Common Stock, par value $.0001 per share, of
West ("West Shares") at a rate of 1.544615 West Share for each Option Share (the
-----------
"Exercise Ratio") and/or, at West's election, (ii) by paying cash at a price
--------------
determined in accordance with Section 4 below. Capitalized terms used in this
Agreement but not defined herein shall have the meanings ascribed thereto in the
Merger Agreement.
<PAGE>
2. Exercise of Option
------------------
The Option may only be exercised by West, in whole or in part, at any time
or from time to time, upon the occurrence of (i) the commencement of a tender or
exchange offer for 25% or more of any class of East's capital stock, or (ii) any
of the events specified in Section 7.3(b)(x) of the Merger Agreement (any of the
events specified in clauses (i) or (ii) of this sentence being referred to
herein as an "Exercise Event"). In the event West wishes to exercise the
--------------
Option, West shall deliver to East a written notice (an "Exercise Notice")
---------------
specifying the total number of Option Shares it wishes to acquire and the form
of consideration to be paid. Each closing of a purchase of Option Shares (a
"Closing") shall occur on a date and at a time designated by West in an Exercise
- --------
Notice delivered at least five business days prior to the date of such Closing,
which Closing shall be held at the offices of counsel to East. The Option shall
terminate upon the earlier of (i) at the Effective Time, (ii) 180 days following
the termination of the Merger Agreement pursuant to Article VII thereof, if an
Exercise Event shall have occurred on or prior to the date of such termination,
and (iii) the date on which the Merger Agreement is terminated pursuant to
Article VII thereof if an Exercise Event shall not have occurred on or prior to
such date; provided, however, with respect to the preceding clause (ii) of this
-------- -------
sentence, that if the Option cannot be exercised by reason of any applicable
government order or because the waiting period related to the issuance of the
Option Shares under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), if applicable, shall not have expired or been
-------
terminated, then the Option shall not terminate until the tenth business day
after such impediment to exercise shall have been removed or shall have become
final and not subject to appeal. Notwithstanding the foregoing, the Option may
not be exercised if West is in breach in any material respect of any of its
covenants or agreements contained in the Merger Agreement.
3. Conditions to Closing
---------------------
The obligation of East to issue Option Shares to West hereunder is subject
to the conditions that (a) any waiting period under the HSR Act applicable to
the issuance of the Option Shares hereunder shall have expired or been
terminated; (b) all consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any Federal, state or local
administrative agency or commission or other Federal state or local governmental
authority or instrumentality, if any, required in connection with the issuance
of the Option Shares hereunder shall have been obtained or made, as the case may
be; and (c) no preliminary or permanent injunction or other order by any court
of competent jurisdiction prohibiting or otherwise restraining such issuance
shall be in effect.
4. Closing
-------
At any Closing, (a) East shall deliver to West a single certificate in
definitive form representing the number of East Shares designated by West in its
Exercise Notice, such certificate to be registered in the name of West and to
bear the legend set forth in Section 10 hereof, and (b) West shall pay to East
the aggregate purchase price for the East Shares so designated and being
purchased by delivery of (i) a single certificate in definitive form
representing the number of West Shares being issued by West in consideration
therefor (based on the Exercise Ratio), such certificate to be registered in the
name of East and to bear the legend set forth in Section 10 hereof, and/or, at
West's
-2-
<PAGE>
election, (ii) a certified check or bank check, as the case may be. If West has
elected to deliver cash in payment for any East Shares, the price to be paid by
West in cash to East at any Closing in respect of such East Shares shall be
$62.75 per share (the "Exercise Price").
--------------
5. Representations and Warranties of East
--------------------------------------
East represents and warrants to West that (a) East is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder; (b) the
execution and delivery of this Agreement by East and consummation by East of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of East and no other corporate proceedings on the
part of East are necessary to authorize this Agreement or any of the
transactions contemplated hereby; (c) this Agreement has been duly executed and
delivered by East and constitutes a legal, valid and binding obligation of East
and, assuming this Agreement constitutes a legal, valid and binding obligation
of West, is enforceable against East in accordance with its terms, except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity; (d) except
for any filings as may be required under the HSR Act, East has taken all
necessary corporate and other action to authorize and reserve for issuance and
to permit it to issue upon exercise of the Option, and at all times from the
date hereof until the termination of the Option will have reserved for issuance,
a sufficient number of unissued East Shares for West to exercise the Option in
full and will take all necessary corporate or other action to authorize and
reserve for issuance all additional East Shares or other securities which may be
issuable pursuant to Section 9(a) upon exercise of the Option, all of which,
upon their issuance and delivery in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable; (e) upon delivery of the
East Shares and any other securities to West upon exercise of the Option, West
will acquire such East Shares or other securities free and clear of all material
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever, excluding those imposed by West; (f) the execution and
delivery of this Agreement by East do not, and the performance of this Agreement
by East will not, (i) violate the Articles of Organization or By-Laws of East,
(ii) conflict with or violate any order applicable to East or any of its
subsidiaries or by which they or any of their property is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the property or assets of
East or any of its subsidiaries pursuant to, any contract or agreement to which
East or any of its subsidiaries is a party or by which East or any of its
subsidiaries or any of their property is bound or affected, except, in the case
of clauses (ii) and (iii) above, for violations, conflicts, breaches, defaults,
rights of termination, amendment, acceleration or cancellation, liens or
encumbrances which would not, individually or in the aggregate, have a Material
Adverse Effect on East; (g) the execution and delivery of this Agreement by East
does not, and the performance of this Agreement by East will not, require any
consent, approval, authorization or permit of, or filing with, or notification
to, any Governmental Entity except pursuant to the HSR Act, if applicable; and
(h) any
-3-
<PAGE>
West Shares acquired pursuant to this Agreement will not be acquired by East
with a view to the public distribution thereof and East will not sell or
otherwise dispose of such shares in violation of applicable law or this
Agreement.
6. Representations and Warranties of West
--------------------------------------
West represents and warrants to East that (a) West is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder; (b) the execution and
delivery of this Agreement by West and the consummation by West of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of West and no other corporate proceedings on the
part of West are necessary to authorize this Agreement or any of the
transactions contemplated hereby; (c) this Agreement has been duly executed and
delivered by West and constitutes a legal, valid and binding obligation of West
and, assuming this Agreement constitutes a legal, valid and binding obligation
of East, is enforceable against West in accordance with its term, except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity; (d) except
for any filings that may be required under the HSR Act, West has taken (or will
in a timely manner take) all necessary corporate and other action to authorize
and reserve for issuance and to permit it to issue upon exercise of the Option
and will take all necessary corporate or other action to authorize and reserve
for issuance all additional West Shares or other securities which may be
issuable pursuant to Section 9(b) upon exercise of the Option, all of which,
upon their issuance and delivery in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable; (e) upon delivery of West
Shares to East in consideration of any acquisition of East Shares pursuant
hereto, East will acquire such West Shares free and clear of all material
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever, excluding those imposed by East; (f) the execution and
delivery of this Agreement by West do not, and the performance of this Agreement
by West will not, (i) violate the Certificate of Incorporation or By-Laws of
West, (ii) conflict with or violate any order applicable to West or any of its
subsidiaries or by which they or any of their property is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the property or assets of
West or any of its subsidiaries pursuant to, any contract or agreement to which
West or any of its subsidiaries is a party or by which West or any of its
subsidiaries or any of their property is bound or affected, except, in the case
of clauses (ii) and (iii) above, for violations, conflicts, breaches, defaults,
rights of termination, amendment, acceleration or cancellation, liens or
encumbrances which would not, individually or in the aggregate, have a Material
Adverse Effect on West; (g) the execution and delivery of this Agreement by West
does not, and the performance of this Agreement by West will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity except pursuant to the HSR Act, if applicable; and
(h) any East Shares acquired upon exercise of the Option will not be acquired by
West with a view to the public distribution thereof and West will not sell or
otherwise dispose of such shares in violation of applicable law or this
Agreement.
-4-
<PAGE>
7. Certain Rights
--------------
(a) West Put. At the request of West at any time during the period
--------
during which the Option is exercisable pursuant to Section 2 (the "Purchase
--------
Period"), East (or any successor entity thereof) shall purchase from West the
- ------
Option, to the extent not previously exercised, at the price set forth in
subparagraph (i) below (as limited by subparagraph (iii) below), and the Option
Shares, if any, acquired by West pursuant thereto, at the price set forth in
subparagraph (ii) below (as limited by subparagraph (iii) below):
(i) The difference between the "Market Price" for East Shares as
------------
of the date West gives notice of its intent to exercise its rights
under this Section 7(a) (defined as the highest closing sale price of
East Shares on the Nasdaq National Market during the five (5) trading
days ending on the trading day immediately preceding such date) and the
Exercise Price, multiplied by the number of East Shares purchasable
pursuant to the Option, but only if the Market Price is greater than
the Exercise Price.
(ii) The Exercise Price paid by West for East Shares acquired
pursuant to the Option plus the difference between the Market Price and
----
such Exercise Price (but only if the Market Price is greater than the
Exercise Price) multiplied by the number of East Shares so purchased.
(iii) Notwithstanding subparagraphs (i) and (ii) above, pursuant
to this Section 7 East shall not be required to pay West in excess of
an aggregate of (x) $40,000,000 plus (y) the Exercise Price paid by
----
West for East Shares acquired pursuant to the Option minus (z) any
-----
amounts paid to West by East pursuant to Section 7.3(b) of the Merger
Agreement.
(b) Redelivery of West Shares. If West has acquired East Shares
-------------------------
pursuant to exercise of the Option by the issuance and delivery of West Shares,
then East shall in fulfillment of its obligation pursuant to the first clause of
Section 7(a)(ii) with respect to the Exercise Price paid in the form of West
Shares only, redeliver all of the applicable certificate(s) for such West Shares
to West free and clear of all claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever, other than those imposed by West.
(c) Payment and Redelivery of Option or Shares. In the event West
------------------------------------------
exercises its rights under Sections 7(a) and (b), East shall, within ten
business days after West delivers notice pursuant to Section 7(a), pay the
required amount to West in immediately available funds (and West Shares, if
applicable) and West shall surrender to East the Option and the certificates
evidencing the East Shares purchased by West pursuant thereto, and West shall
represent and warrant that such shares are then free and clear of all claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever.
-5-
<PAGE>
(d) Restrictions on Transfer. Until the expiration of the Purchase
------------------------
Period, East shall not sell, transfer or otherwise dispose of any West Shares
acquired by it pursuant to this Agreement.
8. Registration Rights
-------------------
(a) Following the termination of the Merger Agreement, each party
hereto (a "Holder") may by written notice (a "Registration Notice") to the other
------ -------------------
party (the "Registrant") request the Registrant to register under the Securities
----------
Act all or any part of the shares acquired by such Holder pursuant to this
Agreement (the "Registrable Securities") in order to permit the sale or other
----------------------
disposition of such shares pursuant to a bona fide firm commitment underwritten
public offering in which the Holder and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use reasonable efforts to prevent any person or group from purchasing
through such offering shares representing more than 1% of the outstanding shares
of Common Stock of the Registrant on a fully diluted basis; provided, however,
-------- -------
that any such Registration Notice must relate to a number of shares equal to at
least 2% of the outstanding shares of Common Stock of the Registrant on a fully
diluted basis and that any rights to require registration hereunder shall
terminate with respect to any shares that may be sold pursuant to Rule 144(k)
under the Securities Act.
(b) The Registrant shall use all reasonable efforts to effect, as
promptly as practicable, the registration under the Securities Act of the
Registrable Securities; provided, however, that (i) neither party shall be
-------- -------
entitled to more than an aggregate of two effective registration statements
hereunder and (ii) the Registrant will not be required to file any such
registration statement during any period of time (not to exceed 40 days after a
Registration Notice in the case of clause (A) below or 90 days after a
Registration Notice in the case of clauses (B) and (C) below) when (A) the
Registrant is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and, in
the written opinion of counsel to such Registrant, such information would have
to be disclosed if a registration statement were filed at that time; (B) such
Registrant is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) such Registrant determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving the Registrant. If consummation of the sale of any
Registrable Securities pursuant to a registration hereunder does not occur
within 180 days after the filing with the SEC of the initial registration
statement therefor, the provisions of this Section 8 shall again be applicable
to any proposed registration, it being understood that neither party shall be
entitled to more than an aggregate of two effective registration statements
hereunder. The Registrant shall use all reasonable efforts to cause any
Registrable Securities registered pursuant to this Section 8 to be qualified for
sale under the securities or blue sky laws of such jurisdictions as the Holder
may reasonably request and shall continue such registration or qualification in
effect in such jurisdictions; provided, however, that the Registrant shall not
-------- -------
be required to qualify to do business in, or consent to general service of
process in, any jurisdiction by reason of this provision.
-6-
<PAGE>
(c) The registration rights set forth in this Section 8 are subject to
the condition that the Holder shall provide the Registrant with such information
with respect to such Holder's Registrable Securities, the plan for distribution
thereof, and such other information with respect to such Holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to enable the
Registrant to include in a registration statement all material facts required to
be disclosed with respect to a registration thereunder.
(d) A registration effected under this Section 8 shall be effected at
the Registrant's expense, except for underwriting discounts and commissions and
the fees and expenses of counsel to the Holder, and the Registrant shall provide
to the underwriters such documentation (including certificates, opinions of
counsel and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings and as such underwriters may reasonably require.
In connection with any registration, the parties agree (i) to indemnify each
other and the underwriters in the customary manner and (ii) to enter into an
underwriting agreement in form and substance customary for transactions of this
type with the underwriters participating in such offering.
9. Adjustment Upon Changes in Capitalization
-----------------------------------------
(a) In the event of any change in the East Shares by reason of stock
dividends, split-ups, mergers (other than the Merger), recapitalizations,
combinations, exchanges of shares and the like, the type and number of shares or
securities subject to the Option, the Exercise Ratio and the Exercise Price
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction so that West shall receive, upon exercise
of the Option, the number and class of shares or other securities or property
that West would have received in respect of the East Shares if the Option had
been exercised immediately prior to such event or the record date therefor, as
applicable.
(b) In the event of any change in the West Shares by reason of stock
dividends, split-ups, mergers (other than the Merger), recapitalizations,
combinations, exchanges of shares and the like, the type and number of shares or
securities which West can deliver to East pursuant to Section 4 hereof in full
payment for any East Shares to be purchased and the Exchange Ratio shall be
adjusted appropriately.
10. Restrictive Legends
-------------------
Each certificate representing Option Shares issued to West hereunder, and
each certificate representing West Shares delivered to East at a Closing, shall
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
-7-
<PAGE>
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF JUNE 6,
1995, A COPY OF WHICH MAY BE OBTAINED FROM [NAME OF COMPANY].
11. Listing and HSR Filing
----------------------
East, upon the request of West, shall promptly file an application to
list the East Shares to be acquired upon exercise of the Option for quotation on
the Nasdaq National Market and shall use its best efforts to obtain approval of
such listing as soon as practicable. West, upon the request of East, shall
promptly file an application to list the West Shares issued and delivered to
East pursuant to Section 4 for quotation on the Nasdaq National Market and shall
use its best efforts to obtain approval of such listing as soon as practicable.
Promptly after the date hereof, each of the parties hereto shall promptly file
with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice all required premerger notification and report
forms and other documents and exhibits required to be filed under the HSR Act,
if any, to permit the acquisition of the East Shares subject to the Option at
the earliest possible date.
12. Binding Effect
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective successors and
permitted assigns any rights or remedies of any nature whatsoever by reason of
this Agreement. Any shares sold by a party in compliance with the provisions of
Section 8 shall, upon consummation of such sale, be free of the restrictions
imposed with respect to such shares by this Agreement and any transferee of such
shares shall not be entitled to the rights of such party. Certificates
representing shares sold in a registered public offering pursuant to Section 8
shall not be required to bear the legend set forth in Section 10.
13. Specific Performance
--------------------
The parties recognize and agree that if for any reason any of the
provisions of this Agreement are not performed in accordance with their specific
terms or are otherwise breached, immediate and irreparable harm or injury would
be caused for which money damages would not be an adequate remedy. Accordingly,
each party agrees that in addition to other remedies the other party shall be
entitled to an injunction restraining any violation or threatened violation of
the provisions of this Agreement. In the event that any action shall be brought
in equity to enforce the provisions of the Agreement, neither party will allege,
and each party hereby waives the defense, that there is an adequate remedy at
law.
-8-
<PAGE>
14. Entire Agreement
----------------
This Agreement and the Merger Agreement (including the appendices
thereto) constitute the entire agreement between the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
15. Further Assurances
------------------
Each party will execute and deliver all such further documents and
instruments and take all such further action as may be necessary in order to
constitute the transactions contemplated hereby.
16. Validity
--------
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect. In the event any
Governmental Entity of competent jurisdiction holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith and shall execute and deliver an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision.
17. Notices
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or sent via telecopy (receipt confirmed) to the parties at the following
addresses or telecopy numbers (or at such other address or telecopy numbers for
a party as shall be specified by like notice):
(1) if to West, to:
Pure Software Inc.
1309 South Mary Avenue
Sunnyvale, CA 94087
Attention: President
Telephone No.: (408) 720-1600
Telecopy No.: (408) 720-9200
with a copy at the same address to the
attention of the General Counsel, and
-9-
<PAGE>
with a copy to:
Wilson, Sonsini, Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
Telephone No.: (415) 493-9300
Telecopy No.: (415) 493-6811
(2) if to East, to:
Atria Software, Inc.
20 Maguire Road
Lexington, MA 02173
Attention: President
Telephone No.: (617) 676-2400
Telecopy No.: (617) 676-2445
with a copy at the same address to the
attention of the General Counsel, and
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower, 125 High Street
Boston, Massachusetts 02110
Attention: Mark J. Macenka, Esq.
Telephone No.: (617) 248-7000
Telecopy No.: (617) 248-7100
18. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to agreements made and to be performed
entirely within such State.
19. Counterparts
------------
This Agreement may be executed in two counterparts, each of which shall be
deemed to be an original, but both of which, taken together, shall constitute
one and the same instrument.
-10-
<PAGE>
20. Expenses
--------
Except as otherwise expressly provided herein or in the Merger Agreement,
all costs and expenses incurred in connection with the transactions contemplated
by this Agreement shall be paid by the party incurring such expenses.
21. Amendments; Waiver
------------------
This Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a waiver, by an
instrument signed on behalf of the party waiving compliance.
22. Assignment
----------
Neither of the parties hereto may sell, transfer, assign or otherwise
dispose of any of its rights or obligations under this Agreement or the Option
created hereunder to any other person, without the express written consent of
the other party, except that West may assign its rights and obligations
hereunder to Sub.
[Remainder of Page Intentionally Blank]
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
PURE SOFTWARE INC.
By: ___________________________________
Name:
Title:
ATRIA SOFTWARE, INC.
By: ___________________________________
Name:
Title:
-12-
<PAGE>
EXHIBIT 5
[Option from West to East]
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT dated as of June 6, 1996 (the "Agreement") is
---------
entered into by and between Pure Software Inc., a Delaware corporation ("West"),
----
and Atria Software, Inc., a Massachusetts corporation ("East").
----
RECITALS
--------
WHEREAS, concurrently with the execution and delivery of this Agreement,
West, East and CST Acquisition Corporation, a Massachusetts corporation and a
wholly owned subsidiary of West ("Sub"), are entering into an Agreement and Plan
---
of Reorganization (the "Merger Agreement"), which provides that, among other
----------------
things, upon the terms and subject to the conditions thereof, Sub will be merged
with and into East (the "Merger") with East continuing as the surviving
------
corporation and as a wholly owned subsidiary of West; and
WHEREAS, as a condition to East's willingness to enter into the Merger
Agreement, East has requested that West agree, and West has so agreed, to grant
to East an option to acquire shares of West's Common Stock upon the terms and
subject to the conditions set forth herein.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option
---------------
West hereby grants to East an irrevocable option (the "Option") to acquire
------
up to 2,646,096 shares (the "Option Shares") of the Common Stock, par value
-------------
$.0001 per share, of West ("West Shares") in the manner set forth below (i) by
-----------
exchanging therefor shares of the Common Stock, par value $.01 per share, of
East ("East Shares") at a rate of 0.64741 East Share for each Option Share (the
-----------
"Exercise Ratio") and/or, at East's election, (ii) by paying cash at a price
--------------
determined in accordance with Section 4 below. Capitalized terms used in this
Agreement but not defined herein shall have the meanings ascribed thereto in the
Merger Agreement.
<PAGE>
2. Exercise of Option
------------------
The Option may only be exercised by East, in whole or in part, at any time
or from time to time, upon the occurrence of (i) the commencement of a tender or
exchange offer for 25% or more of any class of West's capital stock, or (ii) any
of the events specified in Section 7.3(c)(x) of the Merger Agreement (any of the
events specified in clauses (i) or (ii) of this sentence being referred to
herein as an "Exercise Event"). In the event East wishes to exercise the
--------------
Option, East shall deliver to West a written notice (an "Exercise Notice")
---------------
specifying the total number of Option Shares it wishes to acquire and the form
of consideration to be paid. Each closing of a purchase of Option Shares (a
"Closing") shall occur on a date and at a time designated by East in an Exercise
- --------
Notice delivered at least five business days prior to the date of such Closing,
which Closing shall be held at the offices of counsel to West. The Option shall
terminate upon the earlier of (i) at the Effective Time, (ii) 180 days following
the termination of the Merger Agreement pursuant to Article VII thereof, if an
Exercise Event shall have occurred on or prior to the date of such termination,
and (iii) the date on which the Merger Agreement is terminated pursuant to
Article VII thereof if an Exercise Event shall not have occurred on or prior to
such date; provided, however, with respect to the preceding clause (ii) of this
-------- -------
sentence, that if the Option cannot be exercised by reason of any applicable
government order or because the waiting period related to the issuance of the
Option Shares under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), if applicable, shall not have expired or been
-------
terminated, then the Option shall not terminate until the tenth business day
after such impediment to exercise shall have been removed or shall have become
final and not subject to appeal. Notwithstanding the foregoing, the Option may
not be exercised if East is in breach in any material respect of any of its
covenants or agreements contained in the Merger Agreement.
3. Conditions to Closing
---------------------
The obligation of West to issue Option Shares to East hereunder is subject
to the conditions that (a) any waiting period under the HSR Act applicable to
the issuance of the Option Shares hereunder shall have expired or been
terminated; (b) all consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any Federal, state or local
administrative agency or commission or other Federal state or local governmental
authority or instrumentality, if any, required in connection with the issuance
of the Option Shares hereunder shall have been obtained or made, as the case may
be; and (c) no preliminary or permanent injunction or other order by any court
of competent jurisdiction prohibiting or otherwise restraining such issuance
shall be in effect.
4. Closing
-------
At any Closing, (a) West shall deliver to East a single certificate in
definitive form representing the number of West Shares designated by East in its
Exercise Notice, such certificate to be registered in the name of East and to
bear the legend set forth in Section 10 hereof, and (b) East shall pay to West
the aggregate purchase price for the West Shares so designated and being
purchased by delivery of (i) a single certificate in definitive form
representing the number of East Shares being issued by East in consideration
therefor (based on the Exercise Ratio), such certificate to be registered in the
name of West and to bear the legend set forth in Section 10 hereof, and/or, at
-2-
<PAGE>
East's election, (ii) a certified check or bank check, as the case may be. If
East has elected to deliver cash in payment for any West Shares, the price to be
paid by East in cash to West at any Closing in respect of such West Shares shall
be $40.625 per share (the "Exercise Price").
--------------
5. Representations and Warranties of West
--------------------------------------
West represents and warrants to East that (a) West is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder; (b) the execution and delivery of
this Agreement by West and consummation by West of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of West and no other corporate proceedings on the part of West are necessary to
authorize this Agreement or any of the transactions contemplated hereby; (c)
this Agreement has been duly executed and delivered by West and constitutes a
legal, valid and binding obligation of West and, assuming this Agreement
constitutes a legal, valid and binding obligation of East, is enforceable
against West in accordance with its terms, except as enforceability may be
limited by bankruptcy and other laws affecting the rights and remedies of
creditors generally and general principles of equity; (d) except for any filings
as may be required under the HSR Act, West has taken all necessary corporate and
other action to authorize and reserve for issuance and to permit it to issue
upon exercise of the Option, and at all times from the date hereof until the
termination of the Option will have reserved for issuance, a sufficient number
of unissued West Shares for East to exercise the Option in full and will take
all necessary corporate or other action to authorize and reserve for issuance
all additional West Shares or other securities which may be issuable pursuant to
Section 9(a) upon exercise of the Option, all of which, upon their issuance and
delivery in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable; (e) upon delivery of the West Shares and any other
securities to East upon exercise of the Option, East will acquire such West
Shares or other securities free and clear of all material claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever,
excluding those imposed by East; (f) the execution and delivery of this
Agreement by West do not, and the performance of this Agreement by West will
not, (i) violate the Certificate of Incorporation or By-Laws of West, (ii)
conflict with or violate any order applicable to West or any of its subsidiaries
or by which they or any of their property is bound or affected or (iii) result
in any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give rise to any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of West or
any of its subsidiaries pursuant to, any contract or agreement to which West or
any of its subsidiaries is a party or by which West or any of its subsidiaries
or any of their property is bound or affected, except, in the case of clauses
(ii) and (iii) above, for violations, conflicts, breaches, defaults, rights of
termination, amendment, acceleration or cancellation, liens or encumbrances
which would not, individually or in the aggregate, have a Material Adverse
Effect on West; (g) the execution and delivery of this Agreement by West does
not, and the performance of this Agreement by West will not, require any
consent, approval, authorization or permit of, or filing with, or notification
to, any
-3-
<PAGE>
Governmental Entity except pursuant to the HSR Act, if applicable; and (h) any
East Shares acquired pursuant to this Agreement will not be acquired by West
with a view to the public distribution thereof and West will not sell or
otherwise dispose of such shares in violation of applicable law or this
Agreement.
6. Representations and Warranties of East
--------------------------------------
East represents and warrants to West that (a) East is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder; (b) the
execution and delivery of this Agreement by East and the consummation by East of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of East and no other corporate proceedings on the
part of East are necessary to authorize this Agreement or any of the
transactions contemplated hereby; (c) this Agreement has been duly executed and
delivered by East and constitutes a legal, valid and binding obligation of East
and, assuming this Agreement constitutes a legal, valid and binding obligation
of West, is enforceable against East in accordance with its term, except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity; (d) except
for any filings that may be required under the HSR Act, East has taken (or will
in a timely manner take) all necessary corporate and other action to authorize
and reserve for issuance and to permit it to issue upon exercise of the Option
and will take all necessary corporate or other action to authorize and reserve
for issuance all additional East Shares or other securities which may be
issuable pursuant to Section 9(b) upon exercise of the Option, all of which,
upon their issuance and delivery in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable; (e) upon delivery of West
Shares to East in consideration of any acquisition of East Shares pursuant
hereto, East will acquire such West Shares free and clear of all material
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever, excluding those imposed by West; (f) the execution and
delivery of this Agreement by East do not, and the performance of this Agreement
by East will not, (i) violate the Articles of Organization or By-Laws of East,
(ii) conflict with or violate any order applicable to East or any of its
subsidiaries or by which they or any of their property is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the property or assets of
East or any of its subsidiaries pursuant to, any contract or agreement to which
East or any of its subsidiaries is a party or by which East or any of its
subsidiaries or any of their property is bound or affected, except, in the case
of clauses (ii) and (iii) above, for violations, conflicts, breaches, defaults,
rights of termination, amendment, acceleration or cancellation, liens or
encumbrances which would not, individually or in the aggregate, have a Material
Adverse Effect on East; (g) the execution and delivery of this Agreement by East
does not, and the performance of this Agreement by East will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity except pursuant to the HSR Act, if applicable; and
(h) any West Shares acquired upon exercise of the Option will not be acquired by
East with a view to the public distribution thereof and East will not sell or
otherwise dispose of such shares in violation of applicable law or this
Agreement.
-4-
<PAGE>
7. Certain Rights
--------------
(a) East Put. At the request of East at any time during the period
--------
during which the Option is exercisable pursuant to Section 2 (the "Purchase
--------
Period"), West (or any successor entity thereof) shall purchase from East the
- ------
Option, to the extent not previously exercised, at the price set forth in
subparagraph (i) below (as limited by subparagraph (iii) below), and the Option
Shares, if any, acquired by East pursuant thereto, at the price set forth in
subparagraph (ii) below (as limited by subparagraph (iii) below):
(i) The difference between the "Market Price" for West Shares as
------------
of the date East gives notice of its intent to exercise its rights
under this Section 7(a) (defined as the highest closing sale price of
West Shares on the Nasdaq National Market during the five (5) trading
days ending on the trading day immediately preceding such date) and
the Exercise Price, multiplied by the number of West Shares
purchasable pursuant to the Option, but only if the Market Price is
greater than the Exercise Price.
(ii) The Exercise Price paid by East for West Shares acquired
pursuant to the Option plus the difference between the Market Price
----
and such Exercise Price (but only if the Market Price is greater than
the Exercise Price) multiplied by the number of West Shares so
purchased.
(iii) Notwithstanding subparagraphs (i) and (ii) above, pursuant
to this Section 7 West shall not be required to pay East in excess of
an aggregate of (x) $40,000,000 plus (y) the Exercise Price paid by
----
East for West Shares acquired pursuant to the Option minus (z) any
-----
amounts paid to East by West pursuant to Section 7.3(c) of the Merger
Agreement.
(b) Redelivery of East Shares. If East has acquired West Shares
-------------------------
pursuant to exercise of the Option by the issuance and delivery of East Shares,
then West shall in fulfillment of its obligation pursuant to the first clause of
Section 7(a)(ii) with respect to the Exercise Price paid in the form of East
Shares only, redeliver all of the applicable certificate(s) for such East Shares
to East free and clear of all claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever, other than those imposed by East.
(c) Payment and Redelivery of Option or Shares. In the event East
------------------------------------------
exercises its rights under Sections 7(a) and (b), West shall, within ten
business days after East delivers notice pursuant to Section 7(a), pay the
required amount to East in immediately available funds (and East Shares, if
applicable) and East shall surrender to West the Option and the certificates
evidencing the West Shares purchased by East pursuant thereto, and East shall
represent and warrant that such shares are then free and clear of all claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever.
-5-
<PAGE>
(d) Restrictions on Transfer. Until the expiration of the Purchase
------------------------
Period, West shall not sell, transfer or otherwise dispose of any East Shares
acquired by it pursuant to this Agreement.
8. Registration Rights
-------------------
(a) Following the termination of the Merger Agreement, each party
hereto (a "Holder") may by written notice (a "Registration Notice") to the other
------ -------------------
party (the "Registrant") request the Registrant to register under the Securities
----------
Act all or any part of the shares acquired by such Holder pursuant to this
Agreement (the "Registrable Securities") in order to permit the sale or other
----------------------
disposition of such shares pursuant to a bona fide firm commitment underwritten
public offering in which the Holder and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use reasonable efforts to prevent any person or group from purchasing
through such offering shares representing more than 1% of the outstanding shares
of Common Stock of the Registrant on a fully diluted basis; provided, however,
-------- -------
that any such Registration Notice must relate to a number of shares equal to at
least 2% of the outstanding shares of Common Stock of the Registrant on a fully
diluted basis and that any rights to require registration hereunder shall
terminate with respect to any shares that may be sold pursuant to Rule 144(k)
under the Securities Act.
(b) The Registrant shall use all reasonable efforts to effect, as
promptly as practicable, the registration under the Securities Act of the
Registrable Securities; provided, however, that (i) neither party shall be
-------- -------
entitled to more than an aggregate of two effective registration statements
hereunder and (ii) the Registrant will not be required to file any such
registration statement during any period of time (not to exceed 40 days after a
Registration Notice in the case of clause (A) below or 90 days after a
Registration Notice in the case of clauses (B) and (C) below) when (A) the
Registrant is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and, in
the written opinion of counsel to such Registrant, such information would have
to be disclosed if a registration statement were filed at that time; (B) such
Registrant is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) such Registrant determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving the Registrant. If consummation of the sale of any
Registrable Securities pursuant to a registration hereunder does not occur
within 180 days after the filing with the SEC of the initial registration
statement therefor, the provisions of this Section 8 shall again be applicable
to any proposed registration, it being understood that neither party shall be
entitled to more than an aggregate of two effective registration statements
hereunder. The Registrant shall use all reasonable efforts to cause any
Registrable Securities registered pursuant to this Section 8 to be qualified for
sale under the securities or blue sky laws of such jurisdictions as the Holder
may reasonably request and shall continue such registration or qualification in
effect in such jurisdictions; provided, however, that the Registrant shall not
-------- -------
be required to qualify to do business in, or consent to general service of
process in, any jurisdiction by reason of this provision.
-6-
<PAGE>
(c) The registration rights set forth in this Section 8 are subject to
the condition that the Holder shall provide the Registrant with such information
with respect to such Holder's Registrable Securities, the plan for distribution
thereof, and such other information with respect to such Holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to enable the
Registrant to include in a registration statement all material facts required to
be disclosed with respect to a registration thereunder.
(d) A registration effected under this Section 8 shall be effected at
the Registrant's expense, except for underwriting discounts and commissions and
the fees and expenses of counsel to the Holder, and the Registrant shall provide
to the underwriters such documentation (including certificates, opinions of
counsel and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings and as such underwriters may reasonably require.
In connection with any registration, the parties agree (i) to indemnify each
other and the underwriters in the customary manner and (ii) to enter into an
underwriting agreement in form and substance customary for transactions of this
type with the underwriters participating in such offering.
9. Adjustment Upon Changes in Capitalization
-----------------------------------------
(a) In the event of any change in the West Shares by reason of stock
dividends, split-ups, mergers (other than the Merger), recapitalizations,
combinations, exchanges of shares and the like, the type and number of shares or
securities subject to the Option, the Exercise Ratio and the Exercise Price
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction so that East shall receive, upon exercise
of the Option, the number and class of shares or other securities or property
that East would have received in respect of the West Shares if the Option had
been exercised immediately prior to such event or the record date therefor, as
applicable.
(b) In the event of any change in the East Shares by reason of stock
dividends, split-ups, mergers (other than the Merger), recapitalizations,
combinations, exchanges of shares and the like, the type and number of shares or
securities which East can deliver to West pursuant to Section 4 hereof in full
payment for any West Shares to be purchased and the Exchange Ratio shall be
adjusted appropriately.
10. Restrictive Legends
-------------------
Each certificate representing Option Shares issued to East hereunder, and
each certificate representing East Shares delivered to West at a Closing, shall
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
-7-
<PAGE>
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF JUNE 6,
1995, A COPY OF WHICH MAY BE OBTAINED FROM [NAME OF COMPANY]
11. Listing and HSR Filing
----------------------
West, upon the request of East, shall promptly file an application to
list the West Shares to be acquired upon exercise of the Option for
quotation on the Nasdaq National Market and shall use its best efforts to
obtain approval of such listing as soon as practicable. East, upon the
request of West, shall promptly file an application to list the East Shares
issued and delivered to West pursuant to Section 4 for quotation on the
Nasdaq National Market and shall use its best efforts to obtain approval of
such listing as soon as practicable. Promptly after the date hereof, each
of the parties hereto shall promptly file with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice all
required premerger notification and report forms and other documents and
exhibits required to be filed under the HSR Act, if any, to permit the
acquisition of the West Shares subject to the Option at the earliest
possible date.
12. Binding Effect
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
successors and permitted assigns any rights or remedies of any nature
whatsoever by reason of this Agreement. Any shares sold by a party in
compliance with the provisions of Section 8 shall, upon consummation of
such sale, be free of the restrictions imposed with respect to such shares
by this Agreement and any transferee of such shares shall not be entitled
to the rights of such party. Certificates representing shares sold in a
registered public offering pursuant to Section 8 shall not be required to
bear the legend set forth in Section 10.
13. Specific Performance
--------------------
The parties recognize and agree that if for any reason any of the
provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, immediate and irreparable harm or
injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies
the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In
the event that any action shall be brought in equity to enforce the
provisions of the Agreement, neither party will allege, and each party
hereby waives the defense, that there is an adequate remedy at law.
-8-
<PAGE>
14. Entire Agreement
----------------
This Agreement and the Merger Agreement (including the appendices
thereto) constitute the entire agreement between the parties with respect
to the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof.
15. Further Assurances
------------------
Each party will execute and deliver all such further documents and
instruments and take all such further action as may be necessary in order
to constitute the transactions contemplated hereby.
16. Validity
--------
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of the other provisions of
this Agreement, which shall remain in full force and effect. In the event
any Governmental Entity of competent jurisdiction holds any provision of
this Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith and shall execute and deliver an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision.
17. Notices
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery
service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or
telecopy numbers for a party as shall be specified by like notice):
(1) if to West, to:
Pure Software Inc.
1309 South Mary Avenue
Sunnyvale, CA 94087
Attention: President
Telephone No.: (408) 720-1600
Telecopy No.: (408) 720-9200
with a copy at the same address to the
attention of the General Counsel, and
-9-
<PAGE>
with a copy to:
Wilson, Sonsini, Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
Telephone No.: (415) 493-9300
Telecopy No.: (415) 493-6811
(2) if to East, to:
Atria Software, Inc.
20 Maguire Road
Lexington, MA 02173
Attention: President
Telephone No.: (617) 676-2400
Telecopy No.: (617) 676-2445
with a copy at the same address to the
attention of the General Counsel, and
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower, 125 High Street
Boston, Massachusetts 02110
Attention: Mark J. Macenka, Esq.
Telephone No.: (617) 248-7000
Telecopy No.: (617) 248-7100
18. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to agreements made and to be performed
entirely within such State.
19. Counterparts
------------
This Agreement may be executed in two counterparts, each of which shall be
deemed to be an original, but both of which, taken together, shall constitute
one and the same instrument.
-10-
<PAGE>
20. Expenses
--------
Except as otherwise expressly provided herein or in the Merger Agreement,
all costs and expenses incurred in connection with the transactions contemplated
by this Agreement shall be paid by the party incurring such expenses.
21. Amendments; Waiver
------------------
This Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a waiver, by an
instrument signed on behalf of the party waiving compliance.
22. Assignment
----------
Neither of the parties hereto may sell, transfer, assign or otherwise
dispose of any of its rights or obligations under this Agreement or the Option
created hereunder to any other person, without the express written consent of
the other party, except that East may assign its rights and obligations
hereunder to Sub.
[Remainder of Page Intentionally Blank]
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
ATRIA SOFTWARE, INC.
By: ________________________________
Name:
Title:
PURE SOFTWARE INC.
By: ________________________________
Name:
Title:
-12-
<PAGE>
EXHIBIT 6
-1-
FORM OF AFFILIATE AGREEMENT
June 6, 1996
Pure Software Inc.
1309 South Mary Avenue
Sunnyvale, California 94807
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Reorganization dated as of
June 6, 1996 (the "Agreement"), among Pure Software Inc., a Delaware corporation
("Pure"), CST Acquisition Corporation, a Massachusetts corporation and a wholly-
owned subsidiary of Pure ("Merger Sub"), and Atria Software, Inc., a
Massachusetts corporation ("Atria"), Pure will enter into a business combination
with Atria through the merger of Merger Sub with and into Atria (the "Merger"),
with Atria continuing as the surviving corporation and as a wholly-owned
subsidiary of Pure.
The undersigned has been advised that as of the date hereof the undersigned
may be deemed to be an "affiliate" of Pure, as the term "affiliate" is used in
and for purposes of Accounting Series Releases 130 and 135, as amended, and
Staff Accounting Bulletins 65 and 76 of the Commission.
The undersigned understands that the representations, warranties and covenants
set forth herein will be relied upon by Pure, other stockholders of Pure, Atria,
stockholders of Atria and their respective counsel and accountants.
The undersigned represents and warrants to and agrees with Pure that:
1. The undersigned has full power to execute and deliver this Affiliate
Agreement and to make the representations and warranties herein and to perform
its obligations hereunder;
2. The undersigned has carefully read this letter and the Agreement and
discussed its requirements and other applicable limitations upon its ability to
sell, transfer or otherwise dispose of Atria Common Stock and Pure Common Stock
to the extent the undersigned felt necessary, with its counsel or counsel for
Pure.
3. The undersigned shall not make any sale, transfer or other disposition of
Pure Common Stock in violation of the Act or the Rules and Regulations.
<PAGE>
-2-
4. The undersigned agrees with Pure that the undersigned will not sell,
exchange, transfer, pledge, dispose or otherwise reduce his risk relative to any
shares of Pure Common Stock or other equity securities of Pure owned by the
undersigned during the period commencing on the date hereof and ending at such
time as financial results covering at least 30 days of combined operations of
Atria and Pure have been published by Pure, in the form of a quarterly earnings
report, an effective registration statement filed with the Commission, a report
to the Commission on Form 10-K, 10-Q or 8-K, or any other public filing or
announcement which includes the combined results of operations, so as to
interfere with Pure accounting for the Merger as a pooling of interests. Pure,
at its discretion, may cause stop transfer orders to be placed with its transfer
agent with respect to the certificates representing the undersigned's shares of
Pure Common Stock.
5. Pure agrees to publish, as promptly as practicable following the Merger,
financial results covering at least 30 days of combined operations of Atria and
Pure in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q or 8-K, or any other public filing or announcement that includes the
combined results of operations of Pure and Atria; provided, however, that Pure
-------- -------
shall be under no obligation to publish any such financial information other
than with respect to a fiscal quarter of Pure.
6. The undersigned represents and warrants to Pure that the undersigned is
the beneficial owner of the shares of Pure Common Stock and options to purchase
Pure Common Stock indicated below (the "Pure Securities"). Except for Pure
Securities, the undersigned does not beneficially own any shares of Pure Common
Stock or any other equity security of Pure or any options, warrants or other
rights to acquire any equity securities of Pure.
7. This Agreement may not be amended or waived other than by a writing
signed by both the undersigned and Pure.
[Remainder of this Page Intentionally Left Blank]
<PAGE>
-3-
Number of shares of Pure Common Stock
beneficially owned by the undersigned:
_______________
Number of shares of Pure Common Stock
subject to options beneficially owned by the undersigned:
________________
Very truly yours,
(print name of stockholder above)
By: _________________________________
Name:
Title:
(if applicable)
Accepted this 6th day of
June, 1996, by
Pure Software Inc.
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 7
-1-
FORM OF AFFILIATE AGREEMENT
June 6, 1996
Pure Software Inc.
1309 South Mary Avenue
Sunnyvale, California 94807
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Reorganization dated as of
June 6, 1996 (the "Agreement"), among Pure Software Inc., a Delaware corporation
("Pure"), CST Acquisition Corporation, a Massachusetts corporation and a wholly-
owned subsidiary of Pure ("Merger Sub"), and Atria Software, Inc., a
Massachusetts corporation ("Atria"), Pure will enter into a business combination
with Atria through the merger of Merger Sub with and into Atria (the "Merger"),
with Atria continuing as the surviving corporation and as a wholly-owned
subsidiary of Pure. Subject to the terms and conditions of the Agreement, at
the Effective Time (as defined in the Agreement), all of the issued and
outstanding shares of the common stock, $.01 par value per share, of Atria (the
"Atria Common Stock") will be converted into the right to receive shares of the
common stock, $.0001 par value per share, of Pure (the "Pure Common Stock"), on
the basis described in the Agreement.
The undersigned has been advised that as of the date hereof the undersigned
may be deemed to be an "affiliate" of Atria, as the term "affiliate" is (i)
defined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), and/or (ii) used in and for purposes of Accounting Series Releases 130
and 135, as amended, and Staff Accounting Bulletins 65 and 76 of the Commission.
The undersigned understands that the representations, warranties and covenants
set forth herein will be relied upon by Pure, stockholders of Pure, Atria, other
stockholders of Atria and their respective counsel and accountants.
The undersigned represents and warrants to and agrees with Pure that:
1. The undersigned has full power to execute and deliver this Affiliate
Agreement and to make the representations and warranties herein and to perform
its obligations hereunder.
2. The undersigned has carefully read this letter and the Agreement and
discussed its requirements and other applicable limitations upon its ability to
sell, transfer or otherwise dispose of Atria Common Stock and Pure Common Stock
to the extent the undersigned felt necessary, with its counsel or counsel for
Atria.
<PAGE>
-2-
3. The undersigned shall not make any sale, transfer or other disposition of
Pure Common Stock in violation of the Act or the Rules and Regulations.
4. The undersigned has been advised that the issuance of shares of Pure
Common Stock to the undersigned in connection with the Merger has been or will
be registered with the Commission under the Act on a Registration Statement on
Form S-4. However, the undersigned has also been advised that, since the
undersigned may be deemed to have been an affiliate of Atria and the
distribution by the undersigned of any Pure Common Stock has not been
registered, and is not exempt, under the Act, the undersigned may not sell,
transfer or otherwise dispose of Pure Common Stock issued to the undersigned in
the Merger unless (i) such sale, transfer or other disposition has been
registered under the Act, (ii) such sale, transfer or other disposition is made
in conformity with the requirements of Rule 145 promulgated by the Commission
under the Act, or (iii) in the opinion of counsel reasonably acceptable to Pure,
such sale, transfer or other disposition is otherwise exempt from registration
under the Act.
5. Pure is under no obligation to register the sale, transfer or other
disposition of Pure Common Stock by the undersigned or on its behalf under the
Act or to take any other action necessary in order to make compliance with an
exemption from such registration available.
6. Stop transfer instructions will be given to Pure's transfer agent with
respect to the Pure Common Stock and that there will be placed on the
certificates for the Pure Common Stock issued to the undersigned, or any
substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED JUNE 6,
1996 BETWEEN THE REGISTERED HOLDER HEREOF AND PURE SOFTWARE INC., A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF PURE."
7. Unless the transfer by the undersigned of its Pure Common Stock has been
registered under the Act or is a sale made in conformity with the provisions of
Rule 145, Pure reserves the right to put the following legend on the
certificates issued any transferee of the undersigned:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE
HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
<PAGE>
-3-
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933."
8. The legends set forth in paragraphs 6 and 7 above shall be removed by
delivery of substitute certificates without such legend if the undersigned shall
have delivered to Pure a copy of a letter from the staff of the Commission, or
an opinion of counsel in form and substance reasonably satisfactory to Pure, to
the effect that such legend is not required for purposes of the Act.
9. The undersigned is the beneficial owner of (i.e. has sole or shared
voting or investment power with respect to) all the shares of Atria Common Stock
and options to purchase Atria Common Stock indicated on the last page hereof
(the "Atria Securities"). Except for Atria Securities, the undersigned does not
beneficially own any shares of Atria Common Stock or any other equity securities
of Atria or any options, warrants or other rights to acquire any equity
securities of Atria.
10. The undersigned agrees that during the period commencing on the date
hereof and ending at such time as financial results covering at least 30 days of
combined operations of Atria and Pure have been published by Pure, in the form
of a quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or any
other public filing or announcement which includes the combined results of
operations, it will not engage, in any sale, exchange, transfer, pledge,
disposition of or grant of any option, the establishment of any "short" or put-
equivalent position with respect to, or the entry into any similar transaction
intended to reduce the risk of the undersigned's risk of ownership of or
investment in, any of the following:
(a) any shares of Pure Common Stock which the undersigned may acquire in
connection with the Merger, or any securities which may be paid as a
dividend or otherwise distributed thereon or with respect thereto or issued
or delivered in exchange or substitution therefor (all such shares and
other securities being referred to herein, collectively, as "Restricted
Securities"), or any option, right or other interest with respect to any
Restricted Securities;
(b) any Atria Securities; or
(c) any shares of Atria Common Stock or other Atria equity securities
which the undersigned purchases or otherwise acquires after the execution
of this Affiliate Agreement, so as to interfere with Pure accounting for
the Merger as a pooling of interests.
<PAGE>
-4-
11. Pure agrees to publish, as promptly as practicable following the Merger,
financial results covering at least 30 days of combined operations of Atria and
Pure in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q or 8-K, or any other public filing or announcement that includes the
combined results of operations of Pure and Atria; provided, however, that Pure
-------- -------
shall be under no obligation to publish any such financial information other
than with respect to a fiscal quarter of Pure.
12. This Agreement may not be amended or waived other than by a writing
signed by both the undersigned and Pure.
13. In the event they were to become available, the undersigned will not
exercise dissenters' rights in connection with the Merger.
14. The undersigned has no plan or intention to engage in a direct or
indirect sale, exchange, redemption, disposition or conveyance or any
transaction that would have the effect of reducing in any way the undersigned's
risk of ownership including, but not limited to, distributions by a partnership
to its partners and by a corporation to its stockholders, of the shares of Pure
Common Stock to be received by the undersigned in the Merger. The undersigned
acknowledges that he is giving this representation and covenant to enable Testa,
Hurwitz & Thibeault, LLP and Wilson, Sonsini, Goodrich & Rosati to opine that
the Merger constitutes a reorganization within the meaning of Section 368 of the
Code and further recognizes that significant adverse tax consequences might
result if such representation is not true. The undersigned understands and
agrees that, in connection with the Merger, the undersigned will be required to
restate the foregoing representation on or about the Effective Time of the
Merger.
[Remainder of Page Intentionally left blank.]
<PAGE>
-5-
Number of shares of Atria Common Stock
beneficially owned by the undersigned:
________________
Number of shares of Atria Common Stock
subject to options
beneficially owned by the undersigned:
________________
Very truly yours,
(print name of stockholder above)
By: ____________________________
Name:
Title:
(if applicable)
Accepted this 6th day of
June, 1996, by
Pure Software Inc.
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 8
LICENSE AND MARKETING AGREEMENT
This Agreement, made as of June 6, 1996, by and between Pure Software
Inc., a Delaware corporation ("Licensor") and Atria Software, Inc., a
Massachusetts corporation ("Licensee").
WHEREAS, Licensor is the owner of the Software (as defined in Section
1 below), Licensee desires to obtain certain rights and licenses to the
Software, and Licensor desires to grant Licensee such rights and licenses in
accordance with the terms set forth below; and
WHEREAS, Licensee and Licensor desire to set forth their respective
rights and obligations in the event that the Merger Agreement (as defined in
Section 1 below) is terminated under certain conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
-----------
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the following meanings:
(a) "Affiliate" shall mean, with respect to any person or entity, any
other person or entity that is controlled by, under common control with, or
controls such person or entity.
(b) "End-Users" shall mean third party end-user customers receiving
the Software from, directly or indirectly, Licensee pursuant to this
Agreement.
(d) "Merger Agreement" shall mean the Licensor and Licensee have
entered into an Agreement and Plan of Reorganization dated as of June 6,
1996.
(e) "New or Related Products" shall mean all enhancements,
modifications, future versions, translations, derivative works, add-ons and
extensions of or to the Software or any functionality or features of the
Software, developed or created by Licensee. However, "Updates" are not
included as "New or Related Products."
(f) "Net Revenue" shall mean any and all license fee or maintenance,
support or other service fee revenue generated by the licensing (directly
or indirectly) of the Software or any New or Related Product by Licensee,
or the provision of services by Licensee with respect to the Software or
any New or Related Product, constituting revenue recognizable by Licensee
under generally accepted accounting principles consistently applied, less
discounts given, credits taken, and any applicable excise, property, VAT,
sales and use, withholding or similar taxes paid or withheld with respect
to amounts paid or payable to Licensee.
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<PAGE>
(g) "Software" shall mean the defect tracking software marketed by
Licensor and the related end user, technical and instructional manuals and
documentation, in the version currently distributed by Licensor as of the
date hereof, and all Updates, and all new releases, successor versions and
modifications to such related end user, technical and instructional manuals
and documentation.
(h) "Source Code" shall mean the source code version of the Software
including, without limitation, all accompanying programmer's documentation,
build procedures and similar materials provided in connection with such
source code, and all enhancements, modifications, future versions,
translations, derivative works, add-ons and extensions of or to such source
code.
(i) "Updates" shall mean all enhancements, all new releases,
modifications, future versions, translations, derivative works, add-ons and
extensions of or to the Software or any functionality or features of the
Software, developed or created by Licensor.
2.0 Effective Time and License Grants.
---------------------------------
2.1 Effective Time.
--------------
This Agreement will take effect if and only upon termination of the
Merger Agreement by East pursuant to Sections 7.1(b), (c), (d), (g), (h), or
(i), or by Pure pursuant to Section 7.1(l), of the Merger Agreement.
2.2 License Grants.
--------------
(a) Licensor hereby grants Licensee a worldwide, non-exclusive,
royalty bearing license to use, reproduce, display, market,
demonstrate, sublicense and otherwise distribute (either directly or
indirectly) copies of the Software in machine executable object code
form and translate, modify and prepare derivative works of the
documentation and other related materials. Licensee may distribute the
Software in machine executable object code form directly to end-users
("End-Users") or through Licensee's OEMs, VARs or other resellers or
distributors in the chain of distribution to End-Users, provided that
Licensee sublicenses the Software to End-Users and Licensee's OEMs,
VARs or other resellers or distributors pursuant to license agreements
Licensee then uses to sublicense its own products, and such
distributor, reseller and other similar agreements used by Licensee
with respect to its own products. The foregoing includes all rights
necessary for (1) copying and distributing the Software for purposes
of sublicensing to End-Users, (2) demonstration or training activities
in support of such distribution, and (3) the support or maintenance of
the Software. Licensee will enforce intellectual property rights under
this Agreement in the same manner and to the same extent as it does
with respect to its own products, and in any event in a manner
reasonably prudent in light of software industry practices.
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<PAGE>
(b) Licensor hereby grants to Licensee a royalty-bearing
perpetual, non-exclusive, unlimited, world wide, right and license to
install, execute, operate, reproduce, modify, create derivative works
of or otherwise use Source Code, but solely for the purpose of
supporting and maintaining the Software (including, without
limitation, the purpose of creating, supporting and maintaining, New
or Related Products).
(c) Licensor hereby grants to Licensee a royalty bearing,
perpetual, exclusive, unlimited, world wide, right and license to
install, execute, operate, reproduce, modify, create derivative works
of, and use, display, market, demonstrate, sublicense and otherwise
distribute, the New or Related Products; provided that the foregoing
does not grant an exclusive license with respect to those elements of
any New or Related Product that also constitute Software.
(d) Licensor hereby grants Licensee a non-exclusive, royalty
free, worldwide, right and license to use and reproduce the trademarks
used by Licensee to identify the Software, for the limited purpose of
manufacturing, marketing, sublicensing and otherwise distributing, the
Software under and in accordance with this Agreement. Licensee agrees
that (i) such marks, together with the goodwill of the business
symbolized thereby are the sole and exclusive properties of Licensor,
and (ii) the Licensee shall not use any such marks in a disparaging
manner, and shall use correct trademark notices on all materials which
use the marks (which notices shall specifically identify the Licensor
as the owner or licensee of the marks).
3.0 Licensor's Support Obligations.
------------------------------
3.1 Maintenance and Support.
-----------------------
(a) Licensee is authorized to provide maintenance and support to
End-Users, at its own expense through the use of its own resources,
including, but not limited to, the types of maintenance and support
set forth in Exhibit A. Such maintenance and support may be provided,
---------
at Licensee's option, through Licensee's OEMs, VARs or other
distributors in the chain of distribution to End-Users.
(b) Licensor shall use its reasonable efforts to provide Licensee
with technical assistance, advise and instructions concerning the
Software in such a manner and with response times so as to reasonably
permit Licensee to be able to meet its support and maintenance
obligations to its customers under Licensee's standard maintenance
terms set forth in Exhibit A, and to correct errors and defects in the
Software, as set forth on Exhibit A, as such terms may be modified in
---------
a manner and to an extent as may not impose an unreasonable burden
on Licensor.
(c) Licensor shall make available and provide to End-Users,
either directly or through Licensee and Licensee's OEMs, VARs or other
resellers or distributors, any support, maintenance, training or other
Software related services that Licensor
page 3
<PAGE>
makes generally available to its end user customers using the
Software, on as favorable a basis, including, without limitation, the
availability of such services, and the prices, fees, and other terms
and conditions applicable to such services, as Licensor makes
generally available to its own end user customers, OEMs, VARs or other
resellers or distributors, respectively.
3.2 Marketing Support. Licensor shall cooperate and assist Licensee
-----------------
in product integration, joint marketing and sales support activities designed to
assist Licensee in marketing and distributing the Software. The following
activities are examples of the types of activities contemplated under this
Section 3.2 (activities are not limited to this list):
(a) Joint press announcements of the availability of the Software
from Licensee.
(b) Joint participation in trade shows and other customer events.
(c) Training programs for Licensee's sales and support personnel.
(d) Joint advertising and promotion of the Software.
(e) Inclusion of Licensor in appropriate Licensee related
marketing efforts.
(f) Licensor will make beta versions of the Software available to
Licensor and End-users for use as partner and beta sites as early as
possible, and shall make all Software related evaluation, beta, user
group and other similar programs available to on as favorable a basis,
including, without limitation, the availability of such services, and
the prices, fees, and other terms and conditions applicable to such
services, as Licensor makes available to its own end user customers,
OEMs, VARs or other resellers or distributors.
(g) Licensor will provide Licensee with one master, camera-ready
versions of all promotional literature for Licensee to promote,
solicit and obtain orders for the Software.
4.0 Supply.
------
4.1 Demonstration Copies. Licensee shall have the right to
--------------------
distribute unlimited evaluation copies of the Software pursuant to Licensee's
standard evaluation program or policies. Upon termination of this Agreement,
Licensee shall, at Licensor's request, provide a list of al sites to which it
has delivered demonstration copies that have not been returned.
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<PAGE>
4.2 Master Set. Licensor shall deliver to Licensee, a reasonable
----------
number of master copies of the Software, and all Updates in a form suitable for
reproduction and distribution. Additional copies of such materials shall be made
available on an expedited basis upon request in the event the master copies
delivered prove to be defective. Licensor shall also deliver to Licensee for
use under this Agreement any foreign language translations of the Software's
documentation as they become available.
4.3 Source Code. Licensor shall provide one copy of the Source Code
-----------
to Licensee, and shall keep such copy current with all enhancements,
modifications, future versions, translations, derivative works, add-ons and
extensions of or to such Source Code, promptly upon their availability.
4.4 Updated Versions. Licensor shall deliver any Updates of the
----------------
Software promptly upon their availability, in the same form as Licensee received
with respect to the prior versions of such Software or in another mutually
agreed-to format. Licensor shall also deliver to Licensee any other materials
necessary for Licensee to incorporate such Updates in existing programming or to
supersede prior versions.
5.0 Payment and Payment Terms.
-------------------------
5.1 Payments for Software; Maintenance.
----------------------------------
(a) In consideration of the rights granted to Licensee hereunder,
Licensee shall pay Licensor an license fee for each sublicense of the
Software and any New or Related Product, which shall be equal to
thirty percent (30%) of Licensee's Net Revenue from the licensing of
the Software or New or Related Product. The license fee payable
pursuant to this subclause (a) shall not apply to licenses granted as
part of a combined support and maintenance program, for which fees
were paid pursuant to subclause (b) or (c) below.
(b) For maintenance and support of the Software provided by
Licensee pursuant to Section 3.1(c) above, Licensee shall pay to
Licensor fifty percent (50%) of Licensee's Net Revenue from the
maintenance and support fees attributable to such services.
(c) For maintenance and support of the Software provided by
Licensee pursuant to Section 3.1(a) above, Licensee shall pay to
Licensor thirty percent (30%) of Licensee's Net Revenue from the
maintenance and support fees attributable to such services.
(d) All payments to be made pursuant to this Section 5.1 shall be
paid in accordance with Section 5.2.
(e) In the event that the Software or a New or Related Product is
licensed in a combined unit with a single price with other software
product or products of
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<PAGE>
Licensee, the amount deemed to have been paid to Licensee with respect
to such combined products shall be deemed to be allocated in the same
proportion as the relative list prices of such products.
5.2 Payment, Accounts and Auditing. During the term of this
------------------------------
Agreement, Licensee shall retain records in accordance with sound accounting
practices sufficient to support and verify all payments owing to Licensor.
Licensee will provide Licensor, on a monthly basis, within 30 days after the end
of each month, a written certification of all amounts which may be due to
Licensor hereunder, accompanied by payment of such amounts. Licensor shall, not
more than once in any twelve month period, request access to pertinent
supporting records of Licensee, upon reasonable notice during normal business
hours, for purposes of conducting an annual audit. Such audit shall be
conducted by an independent, third party auditing firm, and shall be at
Licensor's expense. However, if the audit shows a difference of ten percent
(10%) or more between the amount owed to Licensor and the amount actually paid
by Licensee to Licensor, Licensor shall pay the cost of such audit and the
amount of any under payment.
5.3 End-User Prices. Licensee shall have sole responsibility for
---------------
establishing and collecting, and shall be entitled to retain, all fees and
charges applicable to its End-Users for the sublicense of the Software, or any
services provided by Licensee, its OEMs, VARs or other distributors in the chain
of distribution to End-Users.
5.4 Taxes. Licensee shall collect, report and pay to the relevant
-----
taxing authority any applicable excise, property, VAT, sales and use,
withholding or similar taxes, and any custom duties, levies, and other similar
charges that are imposed by any jurisdiction for the sale, lease or license of
the Software by Licensee (other than taxes based on Licensor's net income).
6.0. Confidentiality.
---------------
(a) "Confidential Information" shall mean (i) the terms and
conditions of this Agreement, (ii) all Source Code (which shall also
be subject to the restrictions set forth in (c) below) and (iii) all
information disclosed or made available by one party to the other in
the performance of this Agreement and labeled or otherwise designated
or identified as confidential or proprietary, including, without
limitation, information that relates to the other party's past,
present and future research, development and business activities and
all items prepared for or submitted to a party in connection with work
performed under this Agreement. It does not include information (i)
that rightly becomes public through no fault of the receiving party,
(ii) that the receiving party possessed prior to disclosure by the
disclosing party, (iii) that receiving party rightfully receives
without obligation of confidence from a third party that is rightfully
in possession of such information and has not breached any obligation
of confidentiality with respect to the disclosure to the receiving
party, or (iv) that is independently developed by the receiving party.
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<PAGE>
(b) During the term hereof and after the termination or
expiration hereof, the receiving party shall hold all Confidential
Information in trust and confidence for the disclosing party and not
use any Confidential Information other than pursuant to this
Agreement. The receiving party may, with the disclosing party's prior
written consent, disclose Confidential Information to those employees,
consultants and subcontractors whose services are necessary for the
performance of this Agreement and who have agreed in writing to be
bound by provisions sufficient in scope to carry out the terms hereof.
If any medium containing any Confidential Information is lost, the
receiving party shall promptly notify the disclosing party. Upon
completion or termination of the receiving party's services hereunder,
and upon receipt of the disclosing party's request, the receiving
party shall deliver immediately to such disclosing party all media
containing any Confidential Information.
(c) Licensee shall keep in strict confidence, and shall not
disclose, nor use for any purpose other than engaging in the
activities specified in Sections 2.2(b) or 3.1(a) above, the Source
Code or any portion of the Source Code. Licensee shall maintain and
use the Source Code only at Licensee's own development facilities,
stored and kept secure in the same manner as Licensee's own highly
confidential product source code, and access shall be provided only to
those of Licensee's employees or consultants or contractors who
require access to such information in order to conduct the activities
referred to in Sections 2.1(b) or 3.1(a), and who have entered into
agreements requiring that they maintain the confidentiality of such
information consistent with the terms of this Section 6.
7.0 Term and Termination.
--------------------
7.1 Term. The term of this Agreement shall commence upon the date
----
set forth above and shall continue for five years after the date of this
Agreement. Following such original term, this Agreement shall automatically
renew for successive two year renewal terms unless terminated pursuant to
Section 7.2.
7.2 Termination. This Agreement may be terminated only (1) by either
-----------
party in the event that the other party has committed a material breach of any
of its obligations hereunder which has not been cured within 60 days after the
breaching party has received notice thereof, (2) by either party at the end of
the first or any subsequent renewal term by giving the other party written
notice at least one year prior to the end of such term, or (3) by mutual
written agreement of the parties.
7.3 Survival. Notwithstanding any termination of this Agreement,
--------
Licensee's rights and licenses under Sections 2.2 and 3.1(a) concerning support
and maintenance shall survive and continue in effect such that Licensee may
satisfy its support or maintenance obligations to Licensee's customers during
the term remaining under Licensee's support or maintenance contracts or
agreements with such customers existing as of the date of termination, provided
that (i) Licensor continues to be compensated for such maintenance and support
as set forth in Section 5.1, and (ii)
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<PAGE>
Licensee shall not renew or extend the term of such agreements. In addition,
the provisions of Section 6, assurances under Sections 8.1 and 8.9, and the
general limitations contained in Sections 8.2 and 8.3, and 8.12 and 8.15 shall
survive any termination of this Agreement and continue in effect in accordance
with their terms.
8.0 Miscellaneous.
-------------
8.1 Warranties.
----------
(a) Licensor warrants that: (i) it is the holder of all right,
title, and interest in and to the Software; (ii) it has the full power
and authority to enter into and perform this Agreement without the
consent of any third party; (iii) the entering into and performance of
this Agreement will not violate any agreement or contract to which
Licensor is a party; (iv) the current version of the Software will
operate and otherwise be in substantial conformance with the
specifications set forth in the end user or technical manuals,
instructions or other similar documentation issued by Licensor
relating to the Software, for a period of ninety (90) following the
date on which this Agreement will take effect; and (v) each Update
will operate and otherwise be in substantial conformance with the
specifications set forth in the end user or technical manuals,
instructions or other similar documentation issued by Licensor
relating to the Software, for a period of ninety (90) following the
date on which such Update has been released by Licensor.
(b) Licensee warrants that: (i) it has the full power and
authority to enter into and perform this Agreement without the consent
of any third party; and (ii) the entering into and performance of this
Agreement will not violate any agreement or contract to which Licensor
is a party.
8.2 Warranty Limitations and Disclaimers.
------------------------------------
(a) With respect to Software that does not perform substantially
in accordance with the warranties set forth in Section 8.1(a)(iv) and
(v) above, Licensor will provide Licensee with corrected or conforming
code on an exchange basis as expeditiously as is reasonably
practicable after receipt of written notification from Licensee. If
Licensor is unable to provide a corrected copy of the Software within
ninety (90) days of written notification, Licensee may elect to have
Licensor, and Licensor will, and refund the fees paid for the Software
under this Agreement, and this Agreement shall be terminate with
respect to such Software. The provisions of this subsection (a) shall
be Licensee's sole and exclusive remedy with respect to a breach of
the warranty set forth in Section 8.1(a)(iv) or (v).
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<PAGE>
(b) EXCEPT AS OTHERWISE EXPRESSLY STATED IN SECTIONS 8.1 OF THIS
AGREEMENT, NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED. WITHOUT LIMITING THE FOREGOING, LICENSOR EXPRESSLY DISCLAIMS
ALL IMPLIED WARRANTIES OF MERCHANTABILITY, SATISFACTORY QUALITY OR
FITNESS FOR A PARTICULAR PURPOSE.
8.3 Limitations. Except for breaches of Sections 6.0 and 2.0, and
-----------
the indemnification obligation set forth in Section 8.9, neither party shall be
entitled to indirect, incidental or consequential damages, including lost
profits, based on any breach or default under this Agreement.
8.4 Notices. Whenever notice is required or permitted to be given or
-------
delivery required to be made under the provisions of this License Agreement,
such notice or delivery shall be given or made to the following addresses for
the following parties:
If to Licensor:
Pure Software Inc.
1309 South Mary Avenue
Sunnyvale, California
Attn: President
Telephone: (408) 720-1600
Facsimile: (408) 720-9200
If to Licensee:
East, Inc.
20 Maguire Road
Lexington, Massachusetts 02173-3104
Attn: Vice President Finance and Administration
Telephone: (617) 676-2400
Facsimile: (617) 676-2420
Notice shall be deemed duly given when the same has been (a) deposited
with an overnight courier service or (b) deposited in the United States mail,
with postage fully prepaid as certified or registered mail, addressed to the
party at its address as it appears above.
8.5 Freedom of Action. Nothing in this Agreement shall be construed
-----------------
as prohibiting or restricting either party from independently developing or
acquiring and marketing materials and/or programs which are competitive with the
Software.
8.6 No Guarantee of Marketing Success. Licensee makes no
---------------------------------
representations, warranties or promises, express or implied, to Licensor as to
the success of its marketing efforts pursuant to this Agreement or with respect
to the amount of payments that may accrue under the
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<PAGE>
terms of this Agreement. Licensee shall have full freedom and flexibility in
the design and implementation of its marketing program, including, without
limitation, the selection of market channels, the timing and sequence of product
announcements and roll-out programs, the level of effort to be devoted, the
determination of pricing strategy, the specification of maintenance and support
terms and conditions, and the offering of products in connection with or as a
part of other software products and systems and with any computer hardware
equipment.
8.7 Compliance with Laws. Except to the extent such obligation is
--------------------
expressly assumed by Licensee, Licensor shall, at its own expense, comply with
any laws relating to the sale, lease or license of the Software, and shall
procure all licenses and pay all fees and other charges required thereby. Both
Licensor and Licensee shall limit their actions hereunder, to conform to
applicable laws regarding the export or re-export of any information, or any
process, product or service, to countries specified as prohibited destinations,
including the Regulations of the U.S. Department of Commerce and/or the U.S.
State Department, to the extent applicable.
8.9 Indemnities.
-----------
(a) Licensor agrees to protect, defend, hold harmless and
indemnify Licensee from and against any and all claims, suits,
proceedings or other actions arising out of any actual or alleged
infringement or violation of any patent, copyright, trade secret or
other proprietary or intellectual property right of a third party
relating to the Software, but excluding claims of infringement based
upon (i) modifications that were not performed by or on behalf of the
Licensor or (ii) the use or combination of the Software with products
that are not intended to be used with the Software. Licensor shall pay
all damages, settlements, expenses and costs, including costs of
investigation, court costs and attorneys' fees, incurred in connection
with any such claim, suit, proceeding or other action, provided that
such payment shall be contingent upon (i) prompt notice by Licensee to
Licensor in accordance with Section 8.4 hereof of such claim and (ii)
reasonable cooperation by Licensee with Licensor in the defense
thereof, at Licensor's expense, and (iii) and granting Licensor the
right to control the defense or settlement of any action or claim
related thereto.
(b) If Licensor reasonably believes the Software infringes a
third party's proprietary or intellectual property right, or the
Software is finally determined by a court of competent jurisdiction to
so infringe, Licensor may, at its option, either procure for Licensee
the right to continue exercising the rights and licenses granted
Licensee under this Agreement notwithstanding the claimed
infringement, or modify the Software so as to make it non-infringing
without diminishing the features, functionality, performance or
marketability of the Software. Without limiting Licensor's
indemnification obligations, if Licensor fails to procure such a
license or make such modifications, Licensee shall destroy any
inventory of the Software it is then holding for distribution, and
Licensor shall refund to Licensee all fees paid under this Agreement
in an amount not to exceed the amount that Licensee refunds to its own
customers in respect of the Software.
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<PAGE>
(c) Licensee agrees to protect, defend, hold harmless and
indemnify Licensor from and against any and all claims, suits,
proceedings or other actions arising out of any actual or alleged
infringement or violation of any patent, copyright, trade secret or
other proprietary or intellectual property right of a third party
relating to any New or Related Product, but excluding claims of
infringement based upon (i) an infringement which arises because of an
infringement subject to Section 8.9(a) above, (ii) modifications that
were not performed by or on behalf of the Licensee or (iii) the use or
combination of the New or Related Product with products that are not
intended to be used with the New or Related Product. Licensee shall
pay all damages, settlements, expenses and costs, including costs of
investigation, court costs and attorneys' fees, incurred in connection
with any such claim, suit, proceeding or other action, provided that
such payment shall be contingent upon (i) prompt notice by Licensor to
Licensee in accordance with Section 8.4 hereof of such claim and (ii)
reasonable cooperation by Licensor with Licensee in the defense
thereof, at Licensee's expense and (iii) and granting Licensee the
right to control the defense or settlement of any action or claim
related thereto.
8.10 Independent Contractor. Licensor is and shall remain an
----------------------
independent contractor with respect to all work completed pursuant to this
Agreement. Neither Licensor nor any employee of Licensor shall be considered an
employee or agent of Licensee for any purpose.
8.11 No Assignment. Except as provided in this Agreement, neither
-------------
party may sell, transfer, assign, or subcontract any right or obligation set
forth in this Agreement, without the prior written consent of the other party,
except that each party may assign this contract to a successor to all or
substantially all of its business and assets. In addition, Licensee may assign
its rights and responsibilities under this Agreement to any of its affiliates,
in whole or in part. Any act in derogation of the foregoing shall be null and
void.
8.12 Governing Law. The validity, construction, and performance of
-------------
this Agreement will be governed by the substantive law of the State of
California.
The parties further agree that any breach under Sections 2.2, 3.1, 6.0
and 8.2 of this Agreement is likely to result in irreparable injury and that the
non-breaching party shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction, either in law or
in equity, to obtain damages for breaches of such sections of this Agreement to
enforce the specific performance of such provisions of this Agreement.
8.13 Amendments in Writing. No amendment, modification or waiver of
---------------------
any provision of this Agreement shall be effective unless it is set forth in a
writing which refers to the Agreement by number and the provisions so affected
and is executed by an authorized representatives of both parties. No failure or
delay by either party in exercising any right, power or remedy will operate as a
waiver of any such right, power or remedy.
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<PAGE>
8.14 Entire Agreement. Licensor agrees that it has assessed the
----------------
opportunity for marketing the Software independently of any representation or
information provided by Licensee. The provisions of this Agreement constitute
the entire agreement between the parties and supersede all prior agreements,
oral or written, relating to the subject matter of this Agreement except any
agreements specifically reference herein. Any terms contained in Licensor
invoices, acknowledgments, shipping instructions or other forms shall be void
and of no effect.
8.15 Proprietary Rights. The Software shall remain the exclusive
------------------
property of Licensor and all rights not expressly granted to Licensee are
reserved. Licensee shall not modify, reverse engineer, disassemble or reverse
compile any portion of the Software, provided that the foregoing shall not limit
or affect Licensee's rights under any legislation implementing the EC Council
Directive on the Legal Protection of Computer Programs.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective authorized representatives.
PURE SOFTWARE INC. ATRIA SOFTWARE, INC.
(Licensor) (Licensee)
By:_____________________________ By:____________________________
Name:_____________________________ Name:___________________________
Title:_____________________________ Title:____________________________
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<PAGE>
EXHIBIT A
---------
SCHEDULE B
Atria Software Support Services
This document outlines the standard software support program provided under
annual support and maintenance contracts for Atria's software products. These
services are provided for all of Atria's end-user customers and distributors
participating in its program of prepaid product support, Monday through Friday,
8:00 AM to 9:00 PM Eastern time, exclusive of Atria holidays.
Support Terms
For the initial product licenses purchased by a customer, support commences on
the date Atria ships the software, and the anniversary of this date will be the
support renewal date for the licenses. If the customer later purchases
additional licenses for the software, the support for these additional licenses
will begin on the date that the licenses are invoiced, and the support fees for
additional licenses will be prorated to the support renewal date of the initial
licenses.
Except for the pro-rated term for additional licenses, a support term is one
year long, and will be subject to renewal at the end of the one year term.
Atria will notify customers of the renewal fees then in effect prior to the
renewal date. Support will expire automatically on the anniversary date unless
renewed for the follow-on annual term. The fees for the renewal year shall be
as specified in Atria's then current Price List. Customers may reinstate lapsed
support by paying all support fees in arrears and all costs invoiced by Atria on
a time and materials basis for updating the software to the current version.
Atria retains the right to modify its support programs but only if the
modifications apply generally to program customers.
Reporting Problems and Support Contacts
If you believe you have discovered a bug in ClearCase, please send your problem
report via electronic mail to the email address of [email protected]. An
example template for a problem report is provided in the appendix of this
document. If you have a problem which you feel is too urgent for a response by
electronic mail, or a question which would be best answered via person-to-person
conversation, please call the ClearCase Hotline at (617) 676-2450. During off
hours and weekends and holidays, you may leave voice mail for the support
engineers.
Whenever possible, please report bugs via electronic mail in preference to the
Hotline. We can do our best job of supporting you when your problem reports
include the transcripts and logs that can be easily included in an email
message. We also require that you designate a primary and secondary contact who
will be authorized support contacts. We believe that having designated and
experienced support contacts can help minimize the turnaround time for resolving
problems and answering questions. Accordingly, Atria may limit its telephone
support to these authorized support contacts.
Atria's hotline and other support services are provided Monday through Friday,
exclusive of Atria holidays. Hours of operation in the Lexington, Massachusetts
support center are from 8:00 AM to 9:00 PM Eastern Standard (U.S.) Time, and in
the Munich, Germany support center from 8:30 AM
<PAGE>
to 5:00 PM Central Europe Time. Weekend and Holiday hotline services may be
offered by Atria for purchase separately by customers, depending on customer
requests and Atria's staffing resources (this off-hours support must be
purchased for all product licenses at the site requesting the support). Hotline
services are limited in the scope of issues that can be addressed; significant
problems may not be able to be resolved without engineering support, which is
only available from the Lexington support center during normal hours of
operation.
Definitions of Priorities
When reporting a problem, please indicate its priority according to the
following definitions:
* Priority 1: Urgent problem: no useful work can be done. The current release
should be patched if a permanent workaround cannot be found and the next
release is not imminent.
* Priority 2: Serious problem: a major function is experiencing a
reproducible problem which causes major inconvenience. The current release
should be patched if a permanent workaround cannot be found and the next
release is not imminent.
* Priority 3: Problem: an important function is experiencing an intermittent
problem, or a common non-essential operation is failing consistently. The
inconvenience can be tolerated until the next scheduled release.
* Priority 4: Minor problems: all other errors. The inconvenience is slight
and can be tolerated.
* Priority 5: Request for enhancements.
Response Procedures
Atria responds to problem reports in three stages:
* 1st level response: Acknowledgment of receipt of problem report with
written confirmation and assignment of error log number. If Atria disagrees
with or has questions about the priority assigned to the problem, the
acknowledgment will note the issue and the priority will be discussed with
the reporting customer.
* 2nd level response: Temporary fix or workaround communicated to customer by
electronic mail or other appropriate means. In the event that the problem
could not be reproduced or diagnosed, the response will indicate such and
may recommend actions to help in the diagnosis or request additional
information.
* 3rd level response: Official fix, update, product release, or updated
manuals. In the event that the problem still could not be reproduced or
diagnosed, the problem report will be closed.
page A-2
<PAGE>
Response Times
The priority of a problem report will dictate response times as follows:
<TABLE>
<CAPTION>
Priority 1st Level Response 2nd Level Response 3rd Level Response
<S> <C> <C> <C>
1 1 day cont. effort next release/30 days (1)
2 1 day 10 days next release/30 days (1)
3 5 days (2) 60 days next release
4 5 days next release open (3)
5 5 days open open
</TABLE>
All "days" are business days.
Footnotes:
(1) Atria wishes to solve P1 and P2 problems quickly while avoiding the
need for frequent maintenance releases. If a permanent workaround can
be found which minimizes customer inconvenience, the problem will be
downgraded to P3 and a final fix in the software will be deferred
until the next release. If a satisfactory workaround cannot be found
and the problem requires a software fix, an update will be made
available within thirty days (even sooner if possible) and a final fix
will be included in the next release.
(2) If Atria wants the customer to preserve information or take further
diagnostic actions for a P3 problem, it will provide a first level
response as soon as possible after receipt of the problem report.
(3) Atria will fix as many P4 problems as possible in the next release,
but will not delay a release for a P4 problem.
Problem Report Template
Please provide the following information when reporting problems:
Reported by: (include your name, email address, and phone number)
At company: (name of your company)
Date reported: (date of initial report)
Type/version of software
exhibiting problem: (type "cleartool -ver" in your shell)
Platform(s) exhibiting
the problem: (brand and software release, e.g. Sun 1.1)
Priority: (according to the definitions on page 1)
Please describe the problem as fully as possible, giving all relevant
information. Whenever possible, include (i) a description of a procedure which
reproduces the problem, (ii) a shell transcript which exhibits the problem,
including prior commands and resulting error messages, and (iii) relevant
excerpts from ClearCase log files).
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